1.Hon’ble Supreme Court of India by Order dated 12.7.2006 in the aforesaid
Writ Petition constituted a Committee to be headed by me to look into the
maladies affecting the proper functioning of the Public Distribution System (PDS) and to suggest remedial
measures.

2.Hon’ble Court’s direction was initially
given for the Government of Delhi to be followed on an all India basis.

3.Committee submitted report on Delhi on 21.8.2007.

4.By order dated 10.1.2008, Hon’ble Court while accepting the
report directedthe
Committee to do the similar exercise in terms of earlier for the entire
country.

5.Scope of the task assigned to the Committee thus having been enlarged,
the Committee projected to the Department of Food & Public Distribution,
additional requirements of staff, space and delegation of financial powers for
its smooth functioning.The Department
dilly dallied anddid
not meet the requirements.The Committee
had to approach the Hon’ble Court again and again.It was only after a peremptory Order dated 25.8.2008
was passed by the Hon’ble Courtthatthe Department started taking steps
for creating necessary infrastructure.It was only thereafter that the Committee could start functioning in
right earnest.The Hon’ble Court extended the time forsubmittingthe report tillApril 2009.

6.The Committee submitted its report for the States of Uttarakhand,
Jharkhand Orissa and Karnataka.Thereafter
the Hon’ble Court has been pleased to extend the time further
till December 2009.The Committee is now
submitting the report of the State of Andhra Pradesh.

7.The Committee has already submitted a separate comprehensive report on
Computerisation of PDS.

8.No one has doubted the utility of PDS being the need for supply
of food grains to the poor of the country at affordable rates.Procurement and distribution of food grains
is a huge and gigantic task but then the whole systemis built on corruption.There are more leakages and maladministration
and benefits to the poor are low.Inefficiency and corruption has made PDS corrupt at several
levels.The system lacks transparency,
accountability, monitoring and enforcing.Survey is not being conducted regularly and properly with the result
people Above poverty Line (APL) have been issued Below Poverty
Line (BPL) cards and those eligible for BPL cards have been ignored.Bogus cards are in abundance.Immediate measures are required to reduce the
diversion of food grains.Delivery
systems under the PDS have to be improved so
that the real beneficiary gets its due entitlement at fixed price, fixed
quantity, fixed time and wholesome quality.Innovative methods are required to improve the system.The whole system has to be totally revamped
and modern technology would appear to be the only answer.

9.Committee has suggested that in order to combat corruption and
strengthening PDS there has to be zero
tolerance approach.Everything appears
to be fine on paper but its implementation is faulty.

10.During its 11 days visit to the Andhra
Pradesh the Committee visited the areas ofHyderabad, Adilabad, Anantapur, Chittoor
(Tirupati mandal) and Visakhapatnam.A few kilometers before reaching Paderu, our
convoy was abruptly stopped and we were told that it was done to remove the red
light on the vehicles.This was a
precautionary measure as we were informed that we were passing through the
naxal infested area.Our visit beyond
Paderu was not allowed as we were told by the ASP of the area stationed at
Paderu that naxalites were in revengeful mood in as much as their leader Patel
Sudhakar Reddy had been killed in an encounter with the police near Hyderabad on 24.5.2009.Naxalites in the area were full of vengeance
and were indulging in reprisals.They
were retaliating and were indulging in kidnapping, looting, burning of vehicles
and buildings and had also laid landmines.In these circumstances the Committee could not proceed further and
inspect the D.R. depots and meet the people. The Committee, thereafter, visited
Araku valley and inspected D.R. Depots in this GCC area.

13.Members of the Committeewho visited the State are Mr. Dinesh
Dayal,Ms. Meenakshi Chauhan, Ms. Naomi
Chandra and Mr. Shohit Chaudhry, members of Legal Team;Mr. K.K. Mittal, Director (Deputy Registrar)
and Mr. J.K. Bhutani, Section Officer.Mr. Dayan Krishnan though could not visit the State,collaboratedin preparing the report.Mr. S.C. Rawal, a former
Registrar of Delhi High Court and appointed as Consultant, performed functions
of the Secretary of the Committee.

14. The Committee is submitting its report which has been divided into
various Chapters likeViability of FPS;
Appointment of FPS dealers; Wholesale& Retail distribution of PDS foodgrains; Vigilance
& Enforcement; Computerisation(IRIS
& Coupons); Findingsand
Recommendations.

Delhi

Dated 10th July 2009

(Justice D.P Wadhwa)

Chairman

Central Vigilance
committee

on Public Distribution System

BROAD OVERVIEW

1.PDS (Public Distribution
System) in Andhra Pradesh is plagued by colossal amount of bogus cards in
circulation.It is in fact a fraud of
gigantic proportion. Even the Civil
Supplies Commissioner of Andhra Pradesh is reported to have stated“… existing 2.35 crore ration cards falsely
reflected a population of 9.8 crores while the State’s population was 8.3
crores.There were only 1.9 crore
households in the State which implies that 45 lakhs ration cards are fake.”

2.So
far no serious attempt seems to have been made to get rid of these cards which
are causing great drainnot only on the
exchequer of the State but also in functioningof the PDS in the State.

3.
Recent newspaper report (dated 24th June 2009 – Dateline Hyderabad) reported that a BPL card has been issued in
the name of Sania Mirza – an ace tennis star of the country.This led the Chief Minister to remark “who is
responsible for issuing the ration cardin the name of Sania Mirza?Has he gone mad?”But then this madness appears to be quite
widespread taking into account the abundance of bogus cards.No such card or for that matter no ration cardcan be
issuedunless it isverified by the official concerned.Whenever a bogus card is found, except to cancel
itno action is
taken against the official and the FPS ownerwhich is plainly and unquestionablya criminal offence.

4.As noted above no serious attempt has
been made to weed out the bogus cards.Issue of these cards is a matter of serious concern but no one so far
has been made responsible.There
should be zero tolerance in the functioning of PDS which is meant for poor
but this appears to have lost much of its meaning in the State with 20 -25% of
cards, which are bogus ,being in abundance. Whenever any process is undertaken to
eliminate bogus cards, elections are announced and then more such cards get
issued.It was confided to the members
of the Committee by some of the officers themselves that they had unwritten
instructions not to make verification and issue white cards to whosoever
applies. As per news-paper report Chief Minister is reported to have given a 3 months deadline for the Civil Supplies Department
to complete the task of delivering ration cards to families thathave not received them so far (Hindu/
Dateline Hyderabad dated 24.6.09).Another
newspaper report (The Hindu Dateline
Hyderabad29.6.2009) also mentions that
the Civilsupplies Minister attributed
this to ‘mistakes’that had crept into
the issuanceof cards at the Mandal
level, where, in some cases cards were given in the name of the dead and
affluent persons, including those owning Mercedes Benz cars!

5.That obtaining white cards issued to the
members of BPL families in bogus and fictitious name is a common
feature.Aforesaid newspaper report (The
Hindu dated 29.6.09) also mentions that obtaining white cards issued to members
of BPL families in bogus and fictitious name was common
feature.It added that the dealers and
middlemen in Andhra Pradesh have gone a step ahead .In spite of the mandatory use of IRIS
technology for issuance of ration cards, dealers and middlemen managed to get
ration cards affixing photographs of hillocks, trains and trees! No blame is
sought to be put on officials without whose connivance such ration cards could
not have been issued.It is bizarre that
it is only the FPS owner whoshould be
considered iniquitous in this skullduggery.An official file records that “due to activities of some FPS owner and some other
unscrupuloustradersfood grainsunder PDS schemeis diverted/misappropriated “.

6.Newspaper
reports suggest thatweeding out one
bogus card willresultin immediate cash saving of Rs.8,400/-per year in the form of essential commodities
worth of Rs.6,000/- and a pensionsof
Rs.2400/-.Further, State Government
will also save Rs. One lakh in the form of educational
facilities and ‘Rs.2 lakh as healthcare.In a meeting with the Chief Secretary and officials, the Committee has
suggested an amnesty scheme.One month
should be given to all concerned to declare bogus/ghost cards.After expiryof this period survey should be made
and if any bogus card is found not only the FPS owner but even the officer concerned who had verified
the application should be prosecuted for offences under the Essential Commodity Act and the Indian Penal Code.Action should also be taken against the card
holder if he is aware of diversion of food grains on the basis of his card.

7.
Iris technology to streamline the systemwas
introducedfour years ago.It has failed in its purpose.By introducing couponsystem an unnecessary layerhas been added.The beneficiary now has to go to Fair Price
Shop not only with ration card but with coupons as well.These coupons are availablein the market/FPSandare obvious source of diversion.To get rid of the maladiesaffecting the PDS there has to beend to end computerization.The Committee has already submitteda report on
computerization of PDS.

8.When
the State Goverment wantedto rationalize the FPSby
limitingthe number of cards per shop, it issued a G.O. 35/2007.This was challengedby a batch of Writ Petitions in the
Andhra Pradesh High Court.Though the Writ
Petitions were dismissed, the Courtobserved that minimum number of cards and the economic viability ofFair Price Shop always be kept in mind
“though the public interest involved may have to be given due weight”.Even though referring to the stand taken by
the State in its counter-affidavit the Court “does again emphasize the economic
viability to be kept in mind while adjusting or arranging the FPSs”.

9.One of the issues referred to the
Committee to examine was, the ideal commissionor the rates payable to the dealers.The Committee did examine the whole aspect of
the matter and is of theviewthat FPS dealer must
sell groceryitemsin addition toPDS items, to make the shop
viable.

10.The Committee finds it difficult to suggest
any increase in the commission as it found that even ifthe commission is increased 100% still
FPS ownerwill not be able to earn
sufficient income to sustain his family of 4 – 5 members.No PDS shop is self-sustainable
unless income is
earned by illegal means, which aid leakages.Otherwise running a Fair Price Shopis not remunerative at all and the
system is designed to fail and leakages to persist.To weed outbogus cards, massive door to door
survey is required and is immediateneed
of the hour. FPS owners at various places also represented
that their shops be made hereditary .It is a difficult proposition to accept .For one, FPS
owner is merely a licencee for a fixed period and secondly, when he says he is
not earning from the FPS and sometime even incurs loss it is notunderstood as to why any one
wouldlike to passonsuch
business to his heirs.FPS owners did
not haveany
explanation to offer.

11.The
allotment of FPS is done in a most arbitrary manner. There is infact no
transparency. FPS is not a largess. Why there is clamour for allotment of FPS
when there is no profit.Reason is not
far to seek.

12.BPL Card, which is a White
Card, is used not only for PDSbutfor other benefits for the BPL.There is a tendency to use white card for medical
purposes and other purposes.A person
may not take rice and use the card for the purposes like free medical
treatment.FPS owner usesthat card to divert the rice.Use of white cards should preferablytherefore be de-linked from other benefits.

13Government of India issue rice @ 35 Kg. per
family.State Government has
rationalizedand issue of rice at the
rate of 4 Kg. per person totaling to 20 Kgs. per month per family.However for AAY familiesother allotment remains at 35 Kg. per
month.Now the BPL (white) cards exceed the
estimate of the Planning Commission, thereforefor additional requirement of rice State Governmentdraws from APL allotment andadds further subsidy.From 2nd
October 2009, the quantity per unit is to be increased to 6 Kgs. per person making
it to 30 Kgs. per family of 5 and that would be maximum.Unless Government of India allots more rice,
burden of subsidy will be on the State Government and that may amount to Rs.35
crores.It is, therefore, all the more incumbenton the
State Governmentto weed out boguscardsthat should apply both to pink and white cards.

14.There is persistentcomplaint by the beneficiaries of
under-weighmentby FPS owner.He in turncomplains ofunder-weighment of supply made to his shop
byabout 2-3 Kgs in each bag of 50
Kgs.There is certainly pilferage of PDS food grain duringtransportation
from FCI godowns to MLS points in thefirst stage and in the second stage from MLS points to FPSs.ExceptforMetropolis of Hyderabad, Vishakhapatnam and Vijaywada there is
door step delivery of PDS in theState of Andhra Pradesh.In these Metropolis, FPSdealershave to make their ownarrangement to lifttheir stock of PDS from MLS points.For this they get Rs. 5/- per quintalextraas commission.It is stated thatsteps are being taken to have door
stepdelivery in these three metropolis
as well by the Corporation.Managing
Director of the APSCSC said that Corporation was ready to make door step deliveryto FPSs in
Metropolis but the FPSowners themselves
do not want the same because of lack of storage space in their shops.Itwas suggestedthat there should be some allowance for
shortage of PDS foodgrains at MLS point as such allowance
is admissible in FCI godowns.This may
relate to stock of rice only.It is
stated thatallowance
to FCI is given both for transportation and storage.In FCI godowns storage is for more thansix months which is not so in MLS points.Allowance forstorage and transportation from FCI to
MLS point in the first stagemay be considered.

15.Everything appears to be in order in the
official papers but in practice this is not so.It is the implementation thatis more important.There is no monitoring and no accountability.
There is failure in implementation with the result that corruption has crept
deep in the system.A separate
vigilance/enforcement department is required in the Civil Supplies
Department.Delivery system has to be
proper and timely.

16.The Committee did not find samples at the MLS points or at Fair Price
shops contrary to the PDS Control Order.These samples should be available at FCI to MLS points and FPSs, which
should be displayed.

17.PDS feeds two systems – (i)
PDS and (ii) black market.

18.Mere cancellation of bogus cards would not
suffice.Action has to be taken against
those responsible for issuance of these cards. The State Government seems to be
hesitant in taking action against officers and the FPS dealers in as much as it
was confided before us that cards were issued without any verification.Knowing fully well the menace of bogus cards,
the State Governmentis lookingthe other way.

19.PDS is corrupt.Corruptionis woven around the mesh of FPS by the
shop owner and officials of the department and the transporters. The whole
system has to be revamped. As per instructions of the Collector Civil Supplies
Chittoor, all household cards were got verified.As per verification reports 8608 White House
hold supply cards ( all cards with 5 or more units i.e having entitlement of 20
kg per card) and 1299 AAY cards ( having entitlement of 35 kg per card ) were
found bogus, as the Card holders were non residents or had left the village or
were above poverty line. Thus the total subsidized rice to these bogus card
holders works out to1721.60 quintals of BPL rice and 454.65
quintals of AAY rice per month.Proceedings of ASO dated 29.4.09 recorded
that these cards had been surrendered to the District Collector, Chittoor along
with connected coupons.Proceedings
further recorded that Fair Price Shop dealers concerned were directed not to
distribute the Essential Commodities to the Card holders and to take back the
cards whenever the card holders present the cards for essential commodities.

20.In spite of request of the Committee to
show some of the bogus cards it was not done.No action was shown to have been taken against the defaulting card
holders, FPS owners or the officials.

21.Earlier eligibility criteriafor BPLfamilyfor obtaining ration cards was thatin theurban area, families with
annual income below Rs.24,000 would meet eligibility criteria.In the case of rural areas, the criteria
would be annual income below Rs.20,000 or land holding
not exceeding 2.5 acres wet or five acres dry land.Cultivatorspossessing land more than the ceiling
would not be eligible for white cards under BPL.Persons owing two, three or four wheelers and
persons whose electricity consumption is over Rs.6,000 per annum, persons
having a pucca building with a plinth area of 500 square feet or more and those
in permanent employment in either government or organized sector would also be
ineligiblefor BPL.

22.The State Government has now revised the
eligibility criteria for white (BPL) card. Families with
income uptoRs
75,000 in urban areas and upto Rs 60,000 in Rural areas are now eligible for
White Cards. Committee was not informed if any other criteriahas been set.

23. In the tribal areas of Andhra Pradesh, it
is GCC (Girijan Cooperative Corporation) which has taken the task of PDS.Tribal Welfare Department is quite concerned that
thereare no
irregularitiesin the PDS through Daily
Requirement Depot s (DR Depots)run by
GCC.In these depots not only PDSfoodgrains but other items of daily requirement
are also sold to the tribals.In one of
the meetings of the members of TribalWelfare Department it was recorded;
“there was serious concern shown with regard to the proposalsforprivatization of GCC and its services to PDS.DR Depots should not behanded over to private bodies or
contractors or even to community institutions likeWomen Thrift Societies as they cannot deal
with the corrupt bodies in the PDS.”

24.This Committee examinedsome of the DR Depotsmanaged by Women Self-help groups. No
doubt therehave
been complaints about the functioningofDR Depots but we could not
suggest any alternative except to say that wherever possible DR Depots should
be managed by the GCC directly through its employees.We find there is shortage of salesmen and one
salesman handles more than two depots to the great inconvenience of the tribal
beneficiaries.Committee has recommendeddeployment
of mobilevansfor PDSin remote villages (like tribal areas) on shandy days (week market days).

25.In apublic meeting organized by the
Committee there were complaints of non-functioning of PDS and also against FPS
owners.For immediate redressal of the
grievances the Committeehas suggested PDS Lok Adalat on the lines
of Bijli/Telephone Adalats to redress thegrievances of thebeneficiaries
on the spot, whenever possible.

FINAL REPORT

***********

Chapter 1

INTRODUCTION

1.1Andhra Pradeshis a state situated on
eastern coast of India
and is bordered by Maharashtra, Chhattisgarh and Orissa in the north, the Bay of Bengal in the East, Tamil Nadu to the south and Karnataka to the west. Andhra
Pradesh is historically called the "Rice Bowl of India". The
State has the longest coastline (972 km) among all the States in India.

1.2The total population of the State is 8.3
crores having approximately 1.82 crore families, but the state has 2.35 crore
ration cards.

1.3The Committee visited the State of Andhra Pradesh from May 31, 2009 to June 11, 2009. During this period the
Committee visited the Districts of

(i)Rangareddy

(ii)Adilabad

(iii)Medak

(iv)Anantapur

(v)Chittoor

(vi)Visakhapatnam

1.4The Committee had discussions with the
Chief Secretary, Commissioner Food and Supplies, Collector Food and Supplies
and other senior officers of the department of Food and Supplies Government of
Andhra Pradesh connected with the Public Distribution system.

1.5The wholesale storage and transportation
and distribution of food grain in the State are managed by the Andhra Pradesh
State Civil Supplies Corporation (APSCSC).

The Committee met the
Vice Chairperson cum Managing Director of the Andhra Pradesh State Civil
Supplies Corporation (APSCSC) and other functionaries of the Corporation.

1.6At the district level the Public
Distribution System is managed by the Joint Collector. He is also ex-officio an
Executive Director of the APSCSC. In the Integrated Tribal Development Agency
areas (ITDA) the affairs of PDS are managed under the
supervision and control of the Project Officer ITDA. The Committee held
discussions with the Collectors and Joint Collectors of the Districts and
Project Officers of the ITDA areas visited by the Committee.

1.7The retail distribution of PDS items is done through
authorised Fair Price Shops in the State. In the Integrated Tribal Development
Agency (ITDA) areas the whole sale and retail distribution is with the Girijan
Cooperative Corporation Limited (GCC). Retail distribution is done through the
Daily Requirement Depots (DR depots) of the GCC. The GCC also maintains the MLS points in ITDA areas.

1.8In order to get public opinion, the
Committee invited the views of the general public through news papers. The
Committee also held Public meetings in Hyderabad, Utnoor, Anantapur and
Paderu. The Committee also went to the villages to meet the consumers /
beneficiaries and to the FPS retail shops, Mandal Level Stockist points of the
APSCSC and GCC. The Committee also studied the working of DR depots of the GCC.

1.9The State of Andhra Pradesh introduced the
Coupon system for distribution of PDS rice and kerosene in
1999. The Committee studied the working of the system during its visits to
various districts.

1.10The ration cards issued in the State of Andhra Pradesh are based on the Iris
Technology and the Committee studied the same.

Chapter 2

LEGAL REGIME

GOVERNING THE PUBLIC DISTRIBUTION SYSTEM

2.1Entities Involved In The Supply Of Food Grains To Consumers:

Various entities are
involved in the process of distribution of food grains. Their role and
functions are set out in brief.

2.1.1The Food Corporation of India (‘FCI’): The FCI was set up
under the Food Corporations Act, 1964, inter alia for the purpose of
distribution of food grains throughout the country under the Public
Distribution System. The FCI is responsible for making food grains available to
the State Governments in terms of the allocations fixed by the Central
Government.

1.The Andhra Pradesh State Civil Supplies
Corporation Limited was incorporated in the year 1974, as a Limited Company
under the Companies Act, 1956.The share capital of the Company was fully
contributed by the Government of Andhra Pradesh.

2.The company is being managed by the Board
of Directors consisting of not less than 2 and not exceeding 8 members at any
time. The Chairman is appointed by the Government from time to time
specifically and in the absence of such an appointment, the Commissioner of
Civil Supplies is the Chairman of the Company.

3.Normally the Board consists of Officials
and Non-officials as appointed by the Government. Presently the Board consists
of the following members:

(i)Commissioner of Civil Supplies:
Chairman

(ii)Vice Chairman & Managing
Director :Director

(iii)Director of Civil Supplies :Director

(iv)Addl. Secretary (Finance) : Director

4.The Vice Chairman & Managing Director
is the Chief Executive of the Corporation. At the corporate office, 4
Functional Managers, an Executive Engineer and 8 mangers assist him / her. The
Corporation has District Offices in all the 23 Districts in the State. The District
Managers maintain a close liaison with the District Administration with regard
to distribution of Essential Commodities like rice, wheat, palmolien oil and
levy sugar. They are under the administrative control of the Joint Collectors
who are nominated as Ex-Officio Executive Directors of the Corporation.

5.The Andhra Pradesh State Civil Supplies
Corporation is a State Agency appointed by the State Government for lifting of
rice and wheat from FCI and levy Sugar from factories under PDS. It is the
responsibility of the Corporation to undertake transportation, storage and
delivery of the stocks under PDS at the doorstep of the Fair
Price Shop Dealers.

6.The transportation of stocks from FCI /
Factories to MLS is called as Stage–I
transportation, which is being undertaken through the district-wise Transport
Contractors appointed for food grains and Levy Sugar.

7.The transportation from MLS Point to the doorstep
of the FPS is called Stage–II transportation. Except for the Corporation areas
of Hyderabad-Secunderabad,Visakhapatnam
and Vijaywada where the transportation from the MLS point is done by the
FPS dealers, in other areas there is door step deliverywhich is being undertaken Corporation
Vehicles and also Stage-II contractors appointed by the Collectors on approval
of the rates by the Head Office of APSCSC.

In some districts the
direct lifting of the food grains is also being undertaken from certain FCI
Godowns to FPS within the radius of 25kms by avoiding Stage-I transportation
and handling charges.

2.1.3Mandal Level Stockist (MLS) Points: The APSCSC has 436
Mandal Level Stockist Points in the State for storage of stocks. Out of the 436
MLS points, 28 MLS points are being
handled by GCC and the remaining 408 MLS points, by the
Corporation.[1]

2.1.4Fair Price Shops (‘FPS’): The Fair
Price Shops are the final link in the chain of distribution of food grains to
the consumers. The State of Andhra Pradesh is divided into 23
districts and there are 42,930 Fair Price Shops[2].
The reservations as provided in the APSPDS (Control) Order, 2008 are as under –

Scheduled Caste- 15%

Scheduled Tribes- 6%

Physically Handicapped- 3%

Backward Classes - 25%

Women - 30%

2.1.5Girijan Cooperative
Corporation Limited (GCC):

The Girijan Co-Operative
Corporation Limited (GCC) is a public sector undertaking of the government of
Andhra Pradesh established in 1956.

1.Objectives

(i)To ensure payment of remunerative prices for the Non Timber Forest
Produce collected by the Tribals by eliminating the middlemen and private
traders who were indulging in unfair trade practices. (Forest produce like Gum,
Honey, Mohwa Flower, Mohwa seeds etc. are purchased from the Tribals)

(ii)To ensure availability of Essential Commodities even in the interior
agency areas through a network of Daily Requirement
Depots. (DR Depots) (These Depots sell essential commodities as well as
commodities of day to day needs of the tribals like soap, detergent, etc.)

(iii)To provide support to the Tribals in their agricultural activities by
extending credit facilities.

2.Organisational Hierarchy

(i)GCC is a State level organization with its Head Quarters at Vishakhapatnam governed by the Board
of Directors nominated by the Government of Andhra Pradesh

(ii)The affairs of the Corporation are administered by the Vice- Chairman
and Managing Director

(iii)The Project Officers of the Integrated Tribal Development Agencies
(ITDAs) act as Executive Directors of GCC in the area of their operation.

For effective
administration, GCC has established 10 Divisional Offices and 43 Girijan
Primary Cooperative Marketing Societies across its area of operation.

3.Daily Requirement Depots

GCC has established 839
Daily Requirement Depots (DR Depots) in tribal areas to cater to the needs of
the tribals by supplying essential commodities under the PDS and other daily requirement
commodities.

4.Self Help Groups

In order to strengthen
Self Help Groups to generate rural employment in the tribal areas, some DR
Depots have been handed over to Self Help Groups, many of which are Women Self
Help Groups which are run entirely by women.

2.2Broad Overview of the Statutory
Regime

The statutory framework
governing and regulating the different aspects of the Public Distribution
System is contained in the Essential Commodities Act 1955, Public Distribution
System (Control) Order 2001 as amended in 2004 and Circulars issued by the
Department of Food & Public Distribution in the Ministry of Consumer
Affairs, Government of India and the Andhra Pradesh State Public Distribution
System (Control) Order, 2008 as well as various Circulars, Orders and
Notifications issued by the Andhra Pradesh State Civil Supplies Corporation.

2.2.1Essential
Commodities Act, 1955: The Essential Commodities Act
1955 (Act) is an Act to provide, in the interest of general public, for the
control of the production, supply and distribution of, and trade and commerce,
in certain commodities.

i.Section 3 of the Act confers powers on the Central Government
to control production, supply, and distribution etc. of essential
commodities.Central Government has issued
an order called the
Public Distribution System (Control) Order 2001, which was amended in 2004.

ii.Stringent provisions exist in the Act and the Control Order,
to deal with any infringement of the provisions of the Act or the Order.

iii.Section 7 provides for penalties.Any person contravening the Order is liable
to be sentenced to imprisonment, which may extend upto 7 years and shall also
be liable to fine.Sentence of
imprisonment cannot be less than 3 months unless there are adequate and special
reasons.The property in respect of
which contravention of the Order has taken place, is liable to be forfeited to
the Government and so also any vehicle used in carrying such commodity.If a person commits offence second time then
imprisonment cannot be less than 6 months subject to, adequate and special
reasons.

iv.Section 8, similarly makes liable a person who attempts to
contravene or abets any contravention of the Control Order.

v.Section 9 provides for punishment upto 5 years or fine or both,
if the record is not maintained in terms of the Control Order or any statement
or information furnished, which is not true.

vi.Section 10 deals with offences by
Companies.

vii.Section 10A has made any offence punishable
under the Act cognizable.

viii.Section 10C provides that Court may presume
the existence of such mental state where an offence under the Act requires
culpable mental state on the part of the accused.“Culpable mental state” includes intention,
motive, knowledge or reason to believe a fact.

ix.Under Section 11, a Court can take cognizance of an offence
under the Act not only on a complaint made by a public servant but also by any
person aggrieved or any recognized consumer organization.

x.An offence for contravention of the Control Order is to be
tried summarily (Section 12A).

xi.If an accused is sentenced to imprisonment for a period not
exceeding one month and of a fine not exceeding Rupees two thousand, no appeal
can be filed.

xii.Section 14 provides that when a person is prosecuted for
contravention of any order which prohibits him from doing any act or being in
possession of a thing without lawful authority or without a permit, licence or
other document, the burden of proving that he has such an authority, permit,
licence or other document, shall be on him.

2.2.2The Public Distribution System (Control) Order, 2001: The Public
Distribution System (Control) Order, 2001 (hereinafter referred to as the ‘PDS Order 2001’) has been
issued by the Central Government in exercise of powers conferred by Section 3
of the Essential Commodities Act, 1955 for maintaining supplies and securing
availability and distribution of essential commodities under the Public
Distribution System. The said Order has been amended in 2004.

2.2.3The Andhra Pradesh State Public Distribution System (Control) Order,
2008:
The Andhra Pradesh State Public Distribution System (Control) Order, 2008 has
been issued by the Government of Andhra Pradesh in pursuance of the PDS (Control) Order 2001 in
exercise of the powers conferred by Section 5 of the Essential Commodities Act,
1955, for the purpose of maintaining supplies and securing equitable
distribution of essential commodities in the State of Andhra Pradesh. The
government has issued certain guidelines for selection and appointment of Fair
Price Shop dealers.

2.2.4Guidelines for
appointment of FPS dealers (GO No.52 dated 18.12.2008):TheState government
has issued guidelines for appointments of FPS Dealers vide the above said GO,
salient features of which, are as under:

(a)All vacancies of FPSs to be notified on the first day of every month by
the appointing authority and invite applications for walk in interview with
original certificates on a specified date.

Backward classes-25%, Reservation for women
30% (out of this 1% for widows of ex-servicemen.

(i)Candidate
shall be resident of Gram Panchayat or Municipal limits of the town in which
the shop is located. Physically handicapped persons shall be residents of the Mandal
concerned but shall shift the place of residence to the place where FPS is
situated.

(j)Preference
to be given to residents of the revenue village or hamlet in which the shop is
located or the Ward in the Municipality where the shop is located - candidates
belonging to the families of freedom fighters, DWCRA groups, thrift groups,
hawkers/ NRs having licence under the APPP rules, 1980.

2.2.5Guidelines to be observed in Tribal Areas:

FPS to be run through
the Daily Requirement Depots of the Girijan Cooperative Corporation or where no
such depots exists through the part time depots of GCC manned by tribal
candidates in the absence ofboth
Project officer ITDA to identify suitable tribal beneficiaries.

The order also gives
general instructions to be followed for appointment of dealers.

2.2.6Criteria for BPL cards as under :Vide GO No.57 dated 13.5.2005, the

State Government fixed
the eligibility criteria for BPL cards popularly known
as White cards.

Urban areas-Rs. 24,000/- per annum

Rural areas-Rs.20,000/- per
annum or

land holding not exceeding
2.5 acres wet and 5 acres dry land

Exclusion norms

(a)Cultivators possessing the land more than the above ceiling.

(b)Persons owning two wheelers, three wheelers, four wheelers (other than
provided under govt. schemes).

(c)Persons whose electricity consumption is more than Rs.6,000/- per annum.

(d)A pucca building having plinth
area of 500 sq.ft. or more
either owned or rented out .

The State government
felt the necessity to revise the eligibility criteria for BPL in order to ensure
total food security and adequate nutrition to its entire population to the
needy and thus, revised the eligibility criteria for BPL cards vide GO No.27
dated 23.7.2008:

Urban areas - Rs.75,000 per annum

Rural areas -Rs.65,000 per annum

2.2.7In order to provide access to the records of Fair
Price Shops, some important instructions were issued vide Memo No.3396 dated
20.10.2003 as under:

(a)List of beneficiaries to
be displayed at FPS / Panchayat offices / Municipal Ward Offices.MRO (Tehsildar) to be responsible
in rural areas and Assistant Supply officers to be responsible in Hyderabad, Secunderabad,
Visakapatnam and Vijayawada.

(b)Selection criteria for
identification of BPL families (including AAY
and Annapoorna) to be properly publicized.

(c)Notice board at Fair Price Shops to display working hours and weekly
holidays

(e)MRO to permit furnishing of
documents pertaining to FPS on payment of actual Xerox charges.

(f)Complaint / suggestion book to be maintained at the FPSs.

(g)MRO to arrange inspection
of FPS against whom complaint has been made by authorized enforcement officials
in the presence of complainant and members of Food Advisory Committees.

(h)Strict implementation of working hours of FPS

2.2.8Movement of Stocks maintenance of records,
physical verifications of stocks during transportation and at MLS points is governed by
the instructions issued vide GO No. 83 dated 21.12.2006 as under:

(i)Food Corporation of India

(a)FCI to deliver stocks against release order only to the representative
of APSCSC.

(b)Stocks to be weighed in the presence of representative on electronic
bridge.

(c)Register to be maintained at loading point (FCI) to record all
transactions month-wise / MLS point-wise- data to be
computerized – computerized monthly statement to be sent to APSCSCL.

This order was published in the Gazette on 18.8.2008 and repealed the
Andhra Pradesh Pulses (licensing, storage and regulation) Order 2007.

2.2.13Food Advisory Committees:

The Food Advisory
Committees were originally constituted vide G.O. Ms. No.470 dated 10th November 1995. The constitution of the
Food Advisory Committees were revised from time to time. Vide Order
No.93 dated 13.7.2005:, the constitution of the
following Committees were provided:

Constitution
of Food Advisory Committees:-

(i)District Level

(ii)Mandal Level

(iii)Village level

(iv)Municipal Corporation Level

(v)Circle level

(vi)Division Level

(vii)Municipality level

(viii)Ward level

(ix)FPS (urban level)

District level and Mandal level
committees are required to meet bi-monthly and all other level to meet
monthly.Days have been fixed for the
monthly meetings, a standard agenda is provided, Collectors
/ CRO have been made responsible for these meetings.

2.2.14Opening of Shops:

Circular No.864 dated
21.6.2002 provides that all Collectors /Chief Rationing Officer should issue
instructions to ensure that ration
shops remain open through out the month during fixed hours and display details
on the notice board.

2.2.15 Duties and
Obligations of a Fair Price Shop Licencee:

i.The PDS Order, 2001, under
Clause 7 read with paragraph 5 of the
Annexure to the Order lays down the
procedure for issue of licences or authorization to the Fair Price Shops for
the distribution of essential commodities under Public Distribution System. The
duties and responsibilities of the Fair Price Shop owners are also provided in
the PDS
Control Order, 2001.

a.Para 5(i) provides that the essential commodities must be sold as per
the entitlement of ration card holders and at the retail issue prices fixed by
the concerned State Government.

b.Para 5(ii) of the
Annexure provides that each FPS will display the following information on a
notice board which is to be put up at a prominent place in the Shop on a daily
basis:-

(i)List of BPL and Antyodaya
beneficiaries,

(ii)
Entitlement of essential commodities,

(iii)Scale of issue,

(iv)Retail
issue prices,

(v)
Timings of opening and closing of the
Fair Price Shop,

(vi) Stock
of essential commodities received during the month,

(vii)
Opening and closing stock of essential
commodities and

(viii) The
authority for redressal of grievances/lodging complaints with respect to
quality and quantity of essential commodities under the Public Distribution
System.

d.Para 5 (iv) requires the
FPS owner to furnish copies of
specified documents such as the ration card register, stock register, sale
register to the office of the Gram Panchayat or Nagar Palika or Vigilance
Committee or any other body authorized by State Governments for the purpose.

e.In
terms of Para 5 (v) the FPS owner is obliged to display samples of foodgrains being supplied through the Fair Price
Shop.

f.Para 5(vi) provides for the production of books and records relating to
the allotment and distribution of essential commodities to the inspecting
agency and furnishing of such information as may be called for by the
designated authority.

g.Para 5(vi) deals with the accounting of the actual
distribution of essential commodities and the balance stock at the end of the
month to the designated authority of the concerned State Government with a copy
to the Gram Panchayat.

h.Para 5(vii) requires
the Fair Price Shop to be opened and closed as per the prescribed timings
displayed on the notice board.

i.Clause
7(2) lays down that the Fair Price Shop owner
shall not refuse to supply the essential commodities, lying in stock, to the
ration card holders, as per their entitlement. Clause 7(3) provides that the Fair
Price Shop owner shall not retain ration cards after the supply of the
essential commodities.

2.2.16Ration Cards

i.The
Government has for the purpose of issuing ration cards divided the target
population into 3 broad categories, Above Poverty Line (‘APL’), Below Poverty Line
(‘BPL’)
and Antyodaya Anna Yojana (‘AAY). Clause 2(d) of the Public Distribution System
Order, 2001 defines 'Above Poverty Line Families' as those families which have been issued Above Poverty Line (APL) ration cards by the
State Governments for issue of foodgrains under the Public Distribution System,
Clause 2(g) defines 'Below Poverty Line families' as those families which have
been identified by the State Government for issue of foodgrains at specially
subsidized rates adopting the estimates of poverty given by the Central
Government Clause 2(e) defines 'Antyodaya families' as the poorest families
from amongst the Below Poverty Line (BPL) families identified
by the State Governments. Such families are entitled to receive foodgrains
under the Antyodaya Anna Yojana.

ii.Clause
3 of the Public Distribution Order 2001 states that State Governments shall
identify families living Below Poverty Line as per paragraph 1 of the Order.
Para 1(1) requires State Governments to formulate suitable guidelines for the
purpose of identification of families living Below the Poverty Line (BPL), including the
Antyodaya families, as per the estimates adopted by the Central Government. It
is further provided that care be taken to ensure that
the families so identified are really the poorest. Para 1(2) requires the State
Governments to get the lists of BPL
and Antyodaya families reviewed every year for the purpose of deletion of
ineligible families and inclusion of eligible families.

iii.Clause
4 of the Public Distribution Order 2001 requires the State Governments to issue
distinctive ration cards to Above Poverty Line, Below Poverty Line and
Antyodaya families and further mandate that a periodical review and checking of
the ration cards be conducted as per paragraph 2 of the Annexure to the Order.
Para 2(3) provides that State Government shall issue distinctive ration cards
to APL,
BPL
and Antyodaya families.

iv.Para
2(4) of the Annexe to the Control Order provides that the designated authority
shall issue a ration card within one month of the date of receipt of the
application after necessary checks and verification.

v.Para
2(6) of the Annexe to the Control Order requires the State Government to
conduct periodical checking of ration cards to weed out ineligible and bogus
ration cards and bogus units in ration cards.

vi.Para
2(8) lays down that elimination of bogus ration cards as well as bogus units in
the ration cards shall be a continuous exercise by the State Governments to
check diversion of essential commodities.

vii.Clause
11 (2) of the PDS
Order 2001 provides that any person aggrieved by an order of the designated
authority denying the issue or renewal of a ration card or cancellation of the
ration card may appeal to the Appellate Authority within thirty days of the
date of receipt of the order.

2.3Monitoring
the Functioning of the Public Distribution System and Other Procedural Aspects

2.3.1Public Audit

i.Para 6(9) of the PDS
Order, 2001 states that the designated authority shall direct the concerned Fair
Price Shop owner to provide relevant extracts of the documents maintained by
him on an application made by a beneficiary, on payment of a prescribed fee.

ii.It is pertinent to note that Clause 7(4)
of the PDS Order, 2001, confers on any ration card holder
desirous of obtaining extracts from the records of a Fair Price Shop owner, the
right to obtain the same by making a written request to such owner along with
deposit of the fee specified by the State Government. Clause 7(4A) imposes an
obligation upon the Fair Price Shop owner to provide extracts of records to the
ration card holder within fourteen days from the date of receipt of a request
and the specified fee under sub-clause (4).

iii.Para
6 (7) of the Order requires State Governments to educate the ration card
holders regarding their rights and privileges under the Public Distribution
System by use of electronic and print media as well as display boards outside Fair
Price Shops.

2.3.2Social Audit

In terms of the
provisions of the Control Order 2001, the government of Andhra Pradesh provided
for the Social Audit of the FPS shops vide Memo No.1242 dated 7.5.2008. This
memo provides for the social audit of FPSs by Praja Committees. The Praja
Committee consists of 10% of the total card holders in the FPSs who are
selected by lot.One third of the FPS in
a Mandal are to be covered every month.Dates and place for the social audit have to
be fixed. The following issues are to be covered in the social audits:

(a)Scrutiny of the appointment
letter of the FPS.

(b)Number of cards category-wise.

(c)Checking the date of stamping done by weighs and measures department.

(d)Quantity of stocks received during the month.

(e)Checking the registers of the FPS.

(f)Scrutinising the aspects relating to quantity, quality, scale of distribution, price and timings of operation.

(g)Complaints / suggestions books.

A check memo has also
been provided for social audit

2.3.3Inspections

i.
Clause 23 of the Andhra Pradesh
State Public Distribution System (Control) Order, 2008 provides for regular
inspections of the FPS by the Joint Collectors, District Supply Officers /
Revenue Divisional Officer, Tehsildar / Assistant Supply Officer, Deputy
Tehsildar (CS) (Enforcement), Revenue Inspector and team of Food Advisory
Committee. This Clause also provides that the Senior Revenue Inspector / Civil
Supplied Inspector shall ensure opening of the Fair Price Shops on time and
running of the shop in distributing the commodities as per scheduled timings.

ii.
The Enforcement staff is required to
maintain a strict vigil, watch and ward to ordain the connivance between the
members of Food Advisory Committees at Mandal and Village Levels.

iii.The Collector, (Civil Supplies) shall
ensure monitoring the functioning of the PDS at the FPS level
through the computer network of the National Informatic Center installed in the
district National Informatic Center. For this purpose computerized codes shall
be issued to each FPS in the district.

iv.The Collector (Civil Supplies) and other
officers of the Civil Supplies department shall direct the concerned FPS owners
to provide relevant extracts of the documents maintained by him on an
application made by a beneficiary on payment of the fee prescribed.

2.3.4Computerisation

i.Para 6(6) of the PDS Control Order,
2001requires State Governments to
ensure monitoring of the functioning of the Public Distribution System at the Fair
Price Shop level through the computer network of the NIC installed in the
District NIC centres and to issue for this purpose computerized codes to each
FPS in the district.

ii.
Similar provision has also been made
in the Andhra Pradesh Control Order, 2008.

2.3.5Vigilance Framework

a.Clause
8 of the PDS
Order 2001 provides that the procedure for monitoring of the Public
Distribution System including the functioning of the Fair Price Shops by the
State Governments shall be as per paragraph 6 of the Annexure to the Order.

b.Para
6 (1) of the Annexure to the PDS
Order requires State Governments to ensure a proper system of monitoring of Fair
Price Shops and prescribes model sale register, stock register and ration card
register. Para 6(2) requires State Governments to ensure regular inspections of
Fair Price Shops, not less than once in six months by the designated authority.
State Governments may issue orders specifying the inspection schedule, list of
check points and the authority responsible for ensuring compliance with the
said orders. Para 6 (3) provides that meetings of the Vigilance Committees on
the Public Distribution System at the State, District, Block and FPS level
shall be held on a regular basis at such dates and periodicity as notified by
State Governments. However, it is stated that the periodicity shall not be less
than one meeting a quarter at all levels. Para 6(4) imposes upon State
Governments the duty to ensure a periodic system of reporting and it further
lays down that the complete information in this regard is be sent in the
prescribed form as follows:

(i) By Fair Price Shops to the District
Authorities by the 7th of the month following the month for which allocation is
made in Form ‘A’.

(ii) By
the District Authorities to State Government by the 15th of the month following
the month for which allocation is made in Form ‘B’.

(iii) By
the State Government to the Central Government by the end of the month
following the month for which allocation is made in Form ‘C’.

c.Clause 6(8)
lays down that State Governments shall issue and adopt the Citizen’s Charter
based on the Model Citizens Charter issued by the Central Government.

d.In the State of Andhra Pradesh the vigilance
committees are called Food Advisory Committees. In its reply to the queries by
the Central Vigilance Committee, the State of Andhra Pradesh has stated that the
government has issued instructions for reconstitution of State Food Advisory
Committees with official and non-official members. The government has also
issued instructions for the constitution of the Food Advisory Committees at
various levels. The district level Committees and Mandal level Committees are
required to meet bi-monthly and all other Committees are required to meet every
month. Evaluation of the function of the FAC has been taken up by all the
Collectors / Chief Rationing Officer, Hyderabad to ensure that action
is taken on the minutes of the meetings of the FAC’s.

2.3.6Search And Seizure

i.The Essential Commodities Act, 1955
provides that any essential commodity and any package, covering or receptacle in
which the essential commodity is stored and any animal, vehicle, vessel or
conveyance used for transporting the essential commodity may be seized and
confiscated under Section 6A pursuant to an Order passed under Section 3.
However, prior to confiscating any essential commodity, package or vehicle,
Section 6B requires that a show cause notice be issued to the person from whom
it is seized.

ii.The PDS Order 2001, under
Clause 10 (1) empowers the authority
authorised by State Government, to inspect or summon such records or documents
as may be considered necessary for examination and take extracts or copies of
any records or documents produced before it. Clause 10(2) lays down that if the
authority has reasons to believe, on receipt of a complaint or otherwise that there has been any contravention of
the provisions of the Order or with a view to securing compliance with the
Order, it may enter, inspect or search the Fair Price Shop or any premises
relevant to transactions of business of the Fair Price Shop. Clause 10(3)
empowers the said authority to search, seize or remove such books of accounts
or stocks of essential commodities where such authority has reason to believe
that these have been used or will be used in contravention of the provisions of
this order. Clause 10(3A) lays down that the authority conducting search
and seizure under sub-clause (3) shall inform the State Government or an
officer authorised by it in this behalf, about the details of the search
conducted and the stocks of essential commodities so seized under that clause.
Clause 10(4) lays down that the
provisions of Section 100 of the Code of Criminal Procedure 1973, relating to
search and seizure shall so far as may, apply to search and seizure under the
Order.

iii.Clause 16 of the Andhra
Pradesh State Public Distribution System (Control) Order, 2008 provides that
any person, authorised by the Appointing Authority of the rank as mentioned in
this Clause, has the following powers –

a.To enter and inspect the
premises of any establishment or shop

b.To summon and enquire from any
person with the relevant and necessary questions

c.To require production of any
document and take or cause to be taken extracts from or copies of such
documents.

d.To take or cause to be taken
the weight or measure of the scheduled commodities found on the premises

e.The provisions of Section 100
of the Code of the Criminal Procedure, 1973 relating to search and seizure
shall so far as may be, apply to search and seizure under this Order.

2.3.7Appeal

i.The Essential Commodities Act, 1955
under Section 6C provides that a person who is aggrieved by the confiscation of
any essential commodity, package or vessel may file an appeal to any judicial
authority appointed by the State Government concerned and the judicial authority
shall, after giving an opportunity to the appellant to be heard, pass such Order
as it may think fit, confirming, modifying or annulling the Order appealed
against.

ii.The PDS Order 2001, under
Clause 11(1) provides that appeals (arising out of the denial of issue/renewal
of ration cards, denial of issue/renewal of licence to run a FPS) may be filed
before the Appellate Authority appointed under Para 7 of the Annexure to the
Order. Clause 11(4) provides that the appeal shall not be disposed off without
providing the person aggrieved a reasonable opportunity of being heard. Clause
11(5) provides that the Appellate Authority may stay the operation of the order
appealed against pending disposal of the appeal or till such time as the person
aggrieved is given a hearing as provided under Clause 11(4). Para 7 of the
Annexure to the Order lays down that the State Governments shall appoint an
officer of that Government not below the rank of Additional District Magistrate
of a District as “Appellate Authority” for exercising the powers conferred upon
and discharging the functions assigned under the PDS Order, 2001.

iii.Clause 20 of the Andhra Pradesh State
Public Distribution System (Control) Order, 2008 provides that any person who
is aggrieved by an order passed by the Disciplinary Authority viz. Tehsildar /
Assistant Supply Officer may within 7 days from the date of receipt of such
order prefer an appeal to the Appointing Authority.

iv.Any person aggrieved by the Order of the
Appointing Authority under Clause 5 of the Control Order, may within 30 days
from the date of receipt of such order appeal against such order where it is
passed by the Revenue Divisional Officer or Sub-Collector or District Supply
Officer to the Collectors (CS) in the District or to the Chief Rationing
Officer in Hyderabad District.

2.3.8Revision

i. Clause
21 of the Andhra
Pradesh State Public Distribution System (Control) Order, 2008 provides for a
revision against an order passed under Clause 20(2). The revision can be
preferred within 30 days before the Commissioner of Civil Supplies, Andhra
Pradesh.

2.4.1The Hon’ble Supreme Court by the order dated 02.05.2003 directed as
follows,

i.That the licences of those Fair Price
Shop owners who do not keep their shops open throughout the month during the
stipulated period, fail to provide grain to BPL families strictly at BPL rates, keep the cards
of BPL households with them, make false entries in the BPL cards, engage in
black-marketing or siphoning away of grains to the open market and hand over
such ration shops to such other person/organizations, will be liable to be
cancelled.

ii.The Government of India was directed to place
the under mentioned classes of persons in the AAY category,

c.Old persons (aged 60 years above) with no regular support and no
assured means of support,

d.Households with a disabled adult and no assured means of subsistence,

e.Households where due to old age, lack of physical or mental fitness,
social customs, need to care for a disabled, or other persons no adult member
is available to engage in gainful employment outside the house.

f.Primitive tribes

2.4.2By the order dated 08.05.2002 the Hon’ble Supreme Court has directed
that Shops will remain open during fixed hours and also has fixed the
responsibility of the CEO/Collector for implementation of the orders of this
Court and further directed that the Chief Secretary will ensure compliance of
the Order of this court.

Chapter 3

WHOLESALE DISTRIBUTION

3.1This Chapter deals with the process of
whole sale distribution of the public distribution system in the State of Andhra Pradesh and the inference drawn
by the Committee from its field visits within the State. The whole sale
distribution could be understood by looking at the functioning of the various
entities involved in the Public Distribution System in the State of Andhra Pradesh. The entities are:

·Food Corporation of India (FCI)

·Department of Consumer Affairs, Food & Civil Supplies

·AndhraPradeshState Civil Supplies
Corporation (APSCSC)

·Girijan Cooperative Corporation Limited (GCC)

3.1.1Food Corporation of India

1.FCI Andhra Pradesh falls under the South
Zone of FCI with its Head Quarters at Chennai. The General Manager of FCI is
the Regional Head who is supported by four Deputy General Managers (DGMs) in
the Regional Offices.

2.There are 15 FCI District Offices and 1
FCI District Office for Andaman and Nicobar Islands. The 15 FCI District
Offices look after the 23 Revenue Districts of Andhra Pradesh. Each district is
headed by a District Manager and Quality Control is entrusted to the Assistant
General Manager. FCI has its own storage facility in addition to hired
capacities available with the State Warehousing Corporation (SWC) and Central
Warehousing Corporation (CWC).

3.The PDS is operated under the
joint responsibility of the Central and the State Governments. The Central
Government has taken the responsibility for procurement, storage,
transportation and bulk allocation of food grains. It is responsible for
procurement storage and transportation of grain up to the Principal centres of
FCI. It is also responsible for allocation to State and maintenance of a buffer
stock. Thus, the role of FCI is very restricted. The FCI procures food grain
from farmers and supplies the same to the State government as per the
allocations made for the State.

4.Recently the Central Government issued a
notification vide its D.O. Letter dated 24-10-07 that a system of regular
inspection be put in place for not only FCI godowns but also for State
government/authorized wholesale godowns. In reference to the said notification,
the FCI issued instructions to all regional general managers vide Letter dated 31-10-07 to conduct inspections of FCI godowns and other wholesale godowns and
FPS. However, during the visit of the Committee to the State of Andhra Pradesh and various MLS Points and FPS, it was
observed that no such inspections were being carried out by the officials of
the FCI.

5.The
Committee observed that the FCI were issuing handwritten weigh check memos, to
the trucks carrying PDS goods to the MLS godowns.

3.1.2Department of Consumer Affairs, Food &
Civil Supplies

1.The following Heads of the Departments
and Corporations are functioning under the administrative control of the
Consumer Affairs, Food and Civil Supplies Department –

i.Commissioner of Civil Supplies
for C.S. Department

ii.Controller Legal Metrology for Legal Metrology Department

iii.President for A.P.State Consumers Disputes Redressal Commission.

iv.Vice-Chairman & Managing Director of APSCSC Ltd.

2.The Commissioner of Civil
Supplies is also the ex-officio Secretary to Government in Consumer Affairs,
Food and Civil Supplies Department. APSCSC Ltd. is a government undertaking
functioning under the control of the Consumer Affairs, Food and Civil Supplies
Department.

3.Brief Functions of the
Consumer Affairs, Food and Civil Supplies Department with respect to PDS are as follows:–

i.Procurement of Rice under Mill
Levy for Central pool by FCI

ii.Distribution of Essential
Commodities to card holders through FPS

iii.Monitoring of prices of
Essential Commodities and Market Intervention Operations for controlling the
open market prices wherever necessary.

iv.Implementation of Consumer
Protection Act through State Commission and District Consumer Forum and other
Consumer Welfare Schemes.

v.Implementation of Packaged
Commodities Rules and MRP and ensuring correct measures and weights through
stamping by Legal Metrology Department.

vi.Implementation of various Control
Orders entrusted to the department administering the affairs of APSCSC.

4.The Joint Collector is
incharge of the Public Distribution System in the districts. He is assisted by
the District Supply Officer, Assistant Supply Officer, and Mandal Revenue
Officer and other such officials. The Joint Collector is also the Ex- officio
Executive Director of APSCSC. The District Manager (DM) of the Corporation is
the operational head in every district. DM APSCSC assists the Joint Collector.
DSO assists the Joint collector (every file goes to Joint Collector through
DSO).For each Revenue Division there is
a Revenue Divisional Officer (RDO, also the SDM). He is the appointing and disciplinary authority. Each
Revenue Division has 5-10 Mandals (previously there were Talulks which were
later divided into Mandals.) Under the RDO there is a Mandal Revenue
Officer (MRO)/Tehsildar and he is the card issuing authority in all the Districts.
In the twin city areas ofHyderabad and
Secundrabad the ASO is theration card issuing
authority. The MRO releases stock to the dealers and issues Release Orders for FPS.

5.As per the Release Order, the MLS incharge releases
stock.There is one Deputy Tehsildar for
every 3 Mandals. Each Mandal has 2 Revenue Inspectors. The Revenue Inspectors
are required to do regular inspections. The Tehsildar issues the Release Order.
Then the Route Officer accompanies the stock in Stage II transportation. After
the delivery of the stock he brings the acknowledgment and hands it over to the
MLSpoint in
charge. MLSpoint in charge are
posted at the MLS itself and it is the Route
Officer of department who is supposed to go with the truck.As per the norms, the Route Officer shall not
be lower than the rank of Junior Assistant.However, during its visit to the State, the Committee was informed that
the Route Officer may be of any rank and may be appointed from any department
under the control of the Tehsildar.

6.The Village Revenue Officer (VRO) assists
the Tehsildar and also Revenue inspector in field work. The VRO assists the
staff in verification and inspection. He distributes the Food Coupon to the
beneficiaries. The FPS dealers submit the Food coupons, the details of food
grain sold and the closing balance, to the Tehsildar.

7.G.O Ms. NO. 84. dated
21.12.2006 provides for detailed responsibilities of theCollector, the Chief Rationing Officer, the
DSO, the District Manager ofAPSCSC, the
RDO, the MRO, the ASO , the Revenue
Inspectors, the MLS incharges and the
Panchayat secretary.

3.1.3AndhraPradeshState Civil Supplies
Corporation (APSCSC)

1.The
Andhra Pradesh State Civil supplies Corporation is a State agency appointed by
the State Government for lifting of rice and wheat from FCI and Levy Sugar from
factories under the Public Distribution System. It is the
responsibility of the Corporation to under take transportation, storage and
delivery of the stocks under PDS at the doorstep of the Fair
Price Shop Dealers.

2.The transportation
of stocks from FCI / Factories to MLS Points is called as
Stage-I Transportation, which is being undertaken through the district wise
Transport Contractors appointed for food grains and levy sugar.

3.The transportation
from MLS Points to the doorsteps of the FPS dealer is
called Stage-II transportation which is being undertaken by the Corporation
through Stage-II contractors appointed by the Collectors (CS) on approval of
rate by the Head Office.

4.In some Districts,
the food grain is lifted directly from FCI godowns to the FP shops if the
distance between the two is within a radius of 25 kms. By this method of
avoiding Stage-I transportation, handling charges are also avoided. In the
Metropolitan areas,that is in the TwinCities, rationed area of Ranga
Reddy District, Vijaywada and Visakhapatnam, FPS dealers themselves
directly lift the stocks from MLS point.

5.Organisational
Set up

(i)Andhra Pradesh State
Civil supplies Corporation Limited, is being managed by the Board of Directors
consisting of not less than 2 (minimum) and not exceeding 8 (maximum) members
at any time. The Chairman , who is also the member of the Board is
appointedby the Governmentfrom time to time specifically and in the
absence of such an appointment the Commissioner of Civil supplies is the
Chairman of the Company. Vide GO Ms No. 17, Consumer Affairs, Food & Civil
Supplies (CS Department dated 26.01.2005, the
Government appoints non-official Chairman and 3 others as non-official
Directors on the Board. The tenure of the Chairman and the Directors is two
years.The tenure of the present
Chairman & non-official Directors expired on 25.1.2007.Apart from the Vice Chairman & Managing
Director, the Director of the Civil Supplies and the nominee from Finance
Department are the other Official Directors.The Chief Executive of the Corporation i.e. the Vice Chairman &
Managing Director, who is an appointee of the Government of Andhra Pradesh,
manages the day-to-day activities of the Organization subject to the control
and directions of the Board.

(ii)Normally the Board
of Directors constitutes the officials and non-officials as appointed by the
Government. Presently the Board consists of the following officials:

a.Commissioner of Civil SuppliesChairman

b.Vice Chairman & Managing DirectorDirector

c.Director of Civil SuppliesDirector

d.Addl. Secretary (Finance)Director

(iii)The Vice Chairman &
Managing Director is the Chief Executive of the Corporation. At the Corporate
Office, 4 Functional Managers, an Executive Engineer and 8 Managers assist
him/her. The Corporation has District Offices in all the 23 Districts in the
State. The District Managers maintain a close liaison with the District Administration
with regard to distribution of Essential Commodities like rice, wheat palm oil
and levy sugar. They are under the administrative control of the Joint
Collectors who are nominated as Ex-Officio Executive Directors of the
Corporation.

(iv)Apart from Functional Heads at the
Head Office and the District Managers at the District level, there are eight
Zonal Managers, who are responsible for internal audit and close supervision of
activities in the Districts under their zone. The District Managers are assisted
by one Assistant Manager (Accounts) in charge of the office accounts and one
Assistant Manager (General) /Assistant Manager (Technical) who looks after the
office administration, warehousing, movement and other such activities.

(v)The Zonal managers are also assisted by
these Assistant Managers, i.e., Assistant Manager (Accounts), Assistant Manager
(General), Assistant Manager (Technical), and they are assigned certain
districts in each region.

(vi)The FCI maintains the stock
necessary for the PDS and the APSCSC lifts
the stock on behalf of the government of Andhra Pradesh as per the allocation
made for the State under various schemes. The Commissioner Civil Supplies,
Andhra Pradesh allocates monthly allotment district-wise. The District Manager,
APSCSC Ltd. lifts the food grain from the godown of the FCI as per the
allocation made by the Collector (CS) and positions the stock at various MLS Points. The
transportation of the stock from the FCI Godowns to the MLS Points is done through
Stage-I Transport Contractors appointed by the APSCSC Ltd.

(vii)The FPS Dealers remit the value of the stock
as per the allocation given by the Assistant Supply Officers / Tehsildars in
favour of the District Manager, APSCSC Ltd. Release orders are issued and the MLS Points deliver
Essential Commodities at the doorsteps of the FPS except in the twin cities of
Hyderabad & Secunderabad and in the city of Visakhapatnam where the FPS
dealers have to lift the Essential Commodities directly from the MLS Points. The FPS dealers
are paid Rs. 5/- per quintal for rice towards arranging their own transport at
these places. The transportation from MLS Points to the FPS is
done through Stage-II Transport Contractors appointed through tender process by
a Committee headed by the Joint Collector.

6.Storage

The APSCSC has 436
Mandal level Stock Points in the State for storage of stocks. Out of the 436 MLS points, 28 MLS points are being
handled by GCC and the remaining 408 MLS points, by the
Corporation.[3]

3.2Allocation
and lifting price

3.2.1The GOI has been
allocating 87,674 Mts. of rice per month for BPL families @ Rs. 5,650/-
per Mt., 54,524 Mts. of rice per month for AAY families @ Rs. 3000/- per Mt.,
131,334 Mts. of rice per month for APL families @ Rs. 8,300/-
per Mt. And 932 Mts. of rice per month for Annanpurna
beneficiaries @ Rs. 5,650/- per Mt.

3.2.2APL allocation:

The GOI has also been
issuing 2,754 Mts. of APL wheat @ Rs. 6100/- per
Mt. The GOI has also allocated 2.60 lakh Mts. of rice ad-hoc additional
allocation of APL rice from October 2008
to March 2009. The GOI has also
allotted 2.40 Mts. of APL rice @ 40,000 Mts. per
month as ad-hoc / additional allotment from April 2009 to September 2009.

The
following are the issue prices fixed by Government of India for lifting food
grain from FCI

Scheme

Prices

APL rice

Rs. 8.30 per quintal

BPL rice

Rs. 565.per quintal

AAY

Rs. 300 per quintal

Wheat

Rs. 610 per quintal

The
following are the end prices of various commodities of the TPDS scheme

Scheme

Prices

APL rice

Rs.9.00 per kg

BPL rice

Rs.2.00 per kg

AAY

Rs. 2.00 per kg

Wheat (APL)

Rs. 7.00 per kg

3.2.3Rs. 2/- a Kg Rice scheme

The Government of Andhra Pradesh has
been reallocating the above allotment to districts under various schemes as
detailed below.

The State Government is releasing a
quantity of 3.11 Lakh Mts. of rice to districts for distribution to the 1.92
crore BPL card holders under Rs. 2/- per Kg. rice scheme. The
scale of distribution to AAY card holders is @ 35 Kgs. per family per month
irrespective of number of members in the card under subsidized rice scheme.
Rice is distributed to AAY/White card holders @ Rs. 2/- per Kg.

3.2.4Unit System

The scale of distribution to White
card holders is @ 4 Kgs. per member subject to a maximum of 20 Kgs. per family
per month. The system is similar to Unit system followed in the State of Karnataka.

The scheme of allotting rice per unit
per month has merit but it has to be ensured that it does not violate the Order
of the Supreme Court which requires that the beneficiaries must get their full
entitlement which is 35 kgs. per family per month.

3.2.5Annapurna Rice

The
GOI allocation of 932 Mts of rice per month for 93,200 Annapurna beneficiaries is being
re-allotted @ 10 Kgs. per beneficiary per month, free of cost.

3.2.6Free Rice to infirm / crippled weavers

As
per orders of the Government of Andhra Pradesh rice is being released to 4000
infirm/ crippled weavers @ 25 Kgs per
month per beneficiary free of cost w.e.f. January 2006.

3.2.7APL Wheat

The
GOI allocation of 2,754 Mts. of APL wheat is being
re-allotted to districts for distribution to the BPL/APL/AAY card holders of
urban areas up to a maximum of 10 Kgs. per family per month @ Rs. 7/- per Kg.
i.e. on economic cost without incurring any subsidy. The GOI has allotted
additional allocation of wheat @ Rs. 1080/- per quintal at Minimum Support
Price (MSP) for a quantity of 2,250 Mts. from March 2009 to June 2009. This
wheat is being distributed to card holders at end consumer price of Rs. 12/-
per Kg.

3.2.8Commissioner
of Civil Supplies (CCS) issues a notification
of monthly district wise allocation of food grain for each scheme. Based on the
district wise allocation, Collector makes FPS wise allocation. On receipt of
this order the District manager of APSCSC deposits a demand draft against the
value of food grain to be lifted for Public Distribution with concerned Area
Manager of FCI. The FCI issues the Release Order after obtaining the stocks
from FCI. The District Manager positions the Stock at the various Mandal Level
Stock (MLS) points. The stocks are transported from the FCI
godown to the MLS points through
transporters appointed on contract by APSCSC known as Stage I
transporters.No officer of the
department accompanies/ escorts the truck while transportation of foodgrain
from FCI to MLS and Stage-I Transport Contractor is responsible
for any short delivery of food grains. The District Supply Officer thereafter
makes allocation for each FPS. The District Manager APSCSC issues release order
for each FPS in terms of the allocation. The FPS owner deposits the money to
get the foodgrain through a Demand Draft with the District Manager APSCSC. In
accordance with the release order the foodgrain is transported by Stage -II
transport contractors to the FPS. At the time of transportation to the FPS, the
truck is accompanied by a Route Officer who is appointed by the Mandal Revenue
Officer/ Tehsildar.

3.2.9Before
visiting the State of Andhra
Pradesh the Committee
had sent a letter dated 8th February 2008 and a questionnaire dated July
2008 seeking information about the
working of the TPDS in state. The committee had received copies of district
wise allocation orders issued by the Commissioner Civil Supplies. The Committee
visited the Suroor Nagar MLS points in Hyderabad, (Circle 1),Ramayampet Medhak District, UtnoorMLS point, Adilabad district, AnantapurUrban and Rural (subdivision), MLS point Singarmala (Anant
pur district), Chandragiri MLS point Chittoor District, MLS point Modugula
VishakhapatnamandMLS operated by GCC, Paderu.

3.2.10MLS Points

i.The
Committee observed that the MLS points had manual
weighing scales of 0.3 MT capacity. There was no
system of weighing the PDS grain on receipt at MLS point.

ii.No
samples are received by the MLS point from the FCI
along with the stocks. There is no system of issuing any samples by the MLS points while issuing
stocks to the FPS.

iii.The
District Manager at Hyderabad informed the Committee that to ensure that the
Stage I contractor delivers the stock from FCI godown, she monitors the stock
through phone, this in fact means that there is no system of informing the MLS point incharge about
the stocks to be delivered to his depot on any particular day. No document was
prepared to show the quantity which would be delivered to MLSpoint on any particular day. The committee was
informed that the incharge of the MLS point has to submit a
daily receipt and issue statement to the District Manager for reconciliation
purposes. The truck driver also produces a receipt of delivery. The claim of
the Hamalies (loaders) is verified according to the supply received and the
stock released from the MLS point.

iv.During
the visits to the MLS points, meetings with
the various District Officials and even in the public meetings held by the
committee there was a general Complaint of short weighment at every stage. The MLS point incharge
complained that they receive short supply from FCI. The FPS owners complained
that they did not receive full quantity of food grain from the MLS points and the general
public also complained of short weighment.

v.At
Anantapur District, the Committee was informed that an error had been found in
the weighbridge of the FCI depot in the previous month and maintenance
contractor was penalised with fine.

vi.The Committee
immediately directed the Inspector of the Legal Metrology Department to check
the weighbridge again and submit a report within 3 hours. The weighbridge at
FCI godown was checked by the Legal Metrology Department and was found to be in
order.The committee was informed that
the Legal Metrology department checks the weighing system annually and the FCI
has given an annual maintenance contract for all its weighbridges at different
depots.

vii.The Assistant Controller, Legal Metrology, Anantapur submitted a
statement showing the number of cases booked against different traders. Extract
of the statement for the 2006-07, 2007-08 and 2008- 09 are as under :

Trade

Upto 3/2006-07

Upto 3/2007-08

Upto3/2008-09

No. of Inspections

No. of

CasesBooked

No. of Inspections

No. of

CasesBooked

No. of Inspections

No. of

CasesBooked

F.P.S.

982

249

1210

233

1091

146

Kerosene Dealers

493

96

408

6

299

22

FCI Godowns

2

2

1

1

4

0

viii.During
the visit to the MLS point Anantapur (Urban)
the committee found 60 hand stitched bags of PDS rice said to contain 60
kg each. The Committee got one of the bag weighed and found that it contains 66
kg of Rice. It may be mentioned here that normally the gunny bags containing PDS grain are stitched with
machines and are supposed to contain an average of 50 kg of grain. The
explanation given for the hand stitched bag was that it contained the grain
which spills out from the bags and falls on the floor at the FCI depot. The
incharge of the MLS point informed the
Committee that 5-6 such bags are received in each truck. It may be stated that
the Committee has not found such large number of hand stitched bags stored in
any other whole sale depot or MLS point visited by the
Committee in the State of Andhra Pradesh or even in other States.

ix.Diversion of food grain can take place in
two ways. One, by outright sale of PDS grain
in open market and secondly, by substitution of good quality grain by inferior
quality food grain.

x.The allegations of short weighment by FPS
dealer show that they are not getting full quantity of grains from the MLS points. The possibility
of Diversion at the Stage I transportation are immense. The Committee came
across a report of diversion of 60 truck loads of PDS rice in Siddipet in
Medhak District. During meetings with the district officials it was admitted
that there are cases of variation in stocks at MLS points and FPS which
have been dealt under section Section 6A of the Essential Commodities Act,
1955. It appears that cases are rarely sent to Court for prosecution under
section 7 of the Essential Commodities Act, 1955. Thus there is no fear of
punishment or imprisonment. Similarly no action appears to have been taken
against the guilty officials though it is admitted that diversion can not take
place without the connivance of the officials.

xi.The MLS points are not equipped
to weigh the food grain received from the FCI as they have weighing scales of
only 0.3 MT capacity. The MLS points have no way of
ensuring that they have received the full quantity from Stage I transport
contractor. The MLS points also do not
receive any samples from the FCI along with the stock and hence no verification
of proper quality can be made. Thus, there are possibilities of diversion by
both the methods described above. There is a great need for installing
electronic weighing systems at the MLS points and indeed there
was a demand at every public meeting by the FPS owners for installing
electronic weighing systems at MLS points. As per the G.O
83 issued in 21.12.2006 the FCI shall ensure that Electronic Weigh Bridges are
installed at all loading points by replacing the existing “Mechanical Weigh
Bridges” within a period of 6 months and it shall further be ensured that the
“Electronic weigh Bridges’ are not operated manually at any point of time. The
Committee found that the Truck Chits, and the Weight Check Memo’s received at MLS point Utnoor were
handwritten and not electronically printed.

xii.Greater the difference in the PDS price and the market
price the greater is the incentive for diversion. In Andhra Pradesh rice is
being distributed under the PDS at Rs 2/ kg where as
the price of similar quantity in open market is about 17 per kg. Thus, there is
a great lure for diversion of the PDS grain. Steps are
required to be taken to avoid such diversions.

xiii.The in-charge of Suroor Nagar MLS point, Circle 1, Hyderabad informed the Committee
that earlier electronic weighing system was installed at his MLS point but it did not
function properly due to fluctuations in voltage of electric supply. He also
stated the electronic weighing system is very sensitive and when the Hamalies
(loaders) throw the bag of grain on the scale, it develops snags or errors.
These statements only show that poor quality weighing systems were deployed
earlier. The Committee reiterates its view expressed in earlier report relating
to the State of Orissa that Complete
Automation of weighing and delivery system is necessary to prevent any
diversion of PDS foodgrain.

xiv.The Committee found that the MLS points did not have any
computer systems. All the records were kept manually. Moreover none of the MLS point had landline
phones installed at the premises.

3.3Transportation

3.3.1Stage- I

i.Government of Andhra Pradesh is
incurring, on an average a subsidy of Rs. 1872 crores per annum. Out of this,
the transport cost is Rs. 76.95 crores, the percentage being 4.11%.

ii.The
APSCSC Ltd. appoints Transport Contractors under Stage I for transportation of
food grain from FCI godowns to MLS points by floating
tenders every year. Along with the Tender, the transporter has to furnish
earnest money of Rs.6 lakhs. The main criterion prescribed for transporters is
that he must have minimum 5 trucks of his own and 5 hired trucks. He has to
furnish a security deposit of Rs.15 Lakhs and a Bank guarantee of Rs.20 Lakhs.
Tender process involves calling of technical and financial bids.

iii.In
its Reply to Committee’s queries, the Government of Andhra stated that the movement
of vehicles is being presently monitored through SMS messages from the
officials at FCI godown to the District Manager’s Office. Once the vehicle is
received, it is informed by the official at the MLS point to the District
office about the receipt. It is further stated that stocks received are weighed
at the MLS point and if there is any variation in stock,
double the value of the stock at actual cost is collected for that shortage
from the contractor. However it was observed during its visit by the Committee
that the said SMS system which even the APSCSC officials claimed existed,
actually does not exist in practice. The Committee found that MLS point incharge and
other officials do not use SMS system as they found it very cumbersome to type
SMS. Similarly, the weighment at MLS point while receiving
stock from FCI is not done in practice as they do not have weighing machines to
weigh such huge quantity of foodgrains and hence weighment is not practically
possible by using small weighing machines.

iv.The Head office appoints by way of
publishing tender notification in newspapers and Tender is taken out separately
for each MLS point.

v.Transportation cost paid is as follows:

For 1-16 Km distance –
Rs. 61 per metric tonne

16 km onwards – Rs. 3
per metric tonne per km

3.3.2Stage II

i.The District Manager of
APSCSC is responsible for entering into contract with Transporters. The
Transport contractor is responsible for transporting essential commodities from
MLS Points to Fair Price Shops within the Mandals
attached to MLS points. Separate agreements are done for each MLS point.

ii.Distribution and transportation of
foodgrain to the retail units from MLS points is done as per
norms of Stage II transportation.

iii.Except
for the cities of Hyderabad, Secundrabad and
Vishakapatanam the transportation of PDS foodgrain from the MLS point to the FPS is
done by APSCSC Ltd through Stage II transport contractors. The appointment of
Stage II transport contractors is done MLS point wise/Mandal wise
by District Administration by floating tenders. The period of contract is two
years (Circular No. PDS 2/MOVT/F.G.5(9)/599/2005-06dated 20-05-2005) The criteria is that
the transporter must have at least 2 Vehicles for transportation from MLS points to Fair Price
Shops. The tender has to be accompanied by earnest money. The rates of earnest
money, security deposit and Bank guarantee are as under:

Allotment of Essential Commodities at MLS points

Earnest Money Deposits

(in
Rs.)

Security Deposits

(in Rs.)

Bank Guarantee

(in Rs.)

Below 500 Mts

15,000.00

30,000.00

1,00,000.00

500-800 MTs

20,000.00

75,000.00

1,25,000.00

Above 800 Mts

25,000.00

1,00,000.00

1,75,000.00

iv.The
individuals / firms who are blacklisted by APSCSC Ltd. at any time are
prohibited from participating in the tenders. The Rice Millers Association /
Rice Millers Lorry owners Associations or their Associates are also prohibited
from participating in tenders. The contractors are prohibited from engaging the
Trucks of the Stage I contractors existing in the Districts or the Rice Millers
or their Associations or persons involved in diversion of stocks or with
criminal record or issues involved in 6-A case under EC Act for the purpose of
transportation of foodgrains under PDS and they should not
have any tie-up arrangements with the above said person.

3.3.3Rates of Transportation

It differs from district
to district. However, rates currently applicable in few districts
is as follows:

In district Medhak the
District Tender Committee comprising of 3 members – headed by Joint Collector
(who is ex-officio executive director for district), DSO, District Manager,
Civil Supplies and representative of Road Transport Authority appointed the
transport contractor through the process of tender. Currently, the flat rate is
applicable which is Rs. 4.75/- per Quintal per km.

In Adilabad rate of
payment to Contractor is Rs 8.30 per quintal irrespective of distance.

3.3.4 Norms regarding Stage II transportation

i.As per norms Stocks should be
transported under stage II transportation from MLS point to door step of
the FPS as per the route plan evolved under escort of a Government official to
ensure proper delivery without diversion or leakage en-route. The Committee, however,
found that at some places the Route Officers were not reporting.

ii.The Validity period
allowed by the GOI for lifting of stock allotted to State is 50 days i.e. from
1st day of the preceding month to 20th of the month for which
the allocation pertains.To ensure that
allocated food grain is delivered to FPS within the first week of the month for
which allocation is made the FPS dealers are instructed by the State Government
to file their Demand Drafts on 18th of preceding month.The release orders are sent to the MLS points on the same day
to commence transportation from MLS point to F.P shop.

iii.On receipt of the Demand
Draft from FPS owner the release Order is required to be issued by the Mandal
Revenue Officer on the same day. MRO is required to issue
Release Order/ Allotment orders FPS wise with reference to the net requirement
based on the gross allotment of FPS the closing balance available with the
dealer on the last day of the month. MRO /ASO has to report the
allotment, lifting and distribution for each FPS commodity wise duly totaling
for the Mandal for the particular month by 3rd of the next month to
the Collector / CRO, Hyderabad to
consolidate and report the district wise position to the commissioner of civil
supplies by 5th of every month.

3.3.5Functioning of e-seva centres

i.e-seva centres send their
daily consolidated reports to the Tehsildar who is also the MRO.Tehsildar prepares the R.O based on the
payment slips / DD submitted by FP dealers. As there is no man to man interaction,
there is no problem of bribery.

ii.Earlier FPS owners were using bank
services and they had to pay commission to the bank for preparing DDs. Now, as
they are making payment through e-seva centres, which charge Rs. 10/- per month,
so it is cheaper mode of payment.

iii.Regarding the delay in issuance RO, once the
money is paid, Tehsildar cannot delay the issuance R.O. so it has led to faster
issuance of Release orders.

3.3.6Responsibilities of Route Officer

i.The MRO shall arrange for a Route
Officer, who should not be lower than the rank of Junior Assistant, who shall
be responsible for delivering stock at FPS and to ensure that there is no
diversion en-route and full quantity is delivered at FPS.

ii.The Route Officer shall
obtain acknowledgement from the FPS dealer after delivering the foodgrains at
FPS under the witness of the Sarpanch of the Village or ward Member or the
Panchayat Secretary. Acknowledgement from the FP shop dealer and two other
persons like Gram Panchayat Sarpanch /Members, Ward Members or Vigilance (Food
Advisory) Committee members or elders of that area is to be taken in token of
receipt of the stocks.

iii.The Route Officer shall also immediately
get entered the details of the stocks delivered in the stock register of the
FPS dealer and attest the entry. Similarly, the stocks should also be written
on the board maintained at the FPS.

iv.The Route Officer is required to ensure
that one sealed sample given by the MLS point in charge
prepared in duplicate containing the signature of MLS point-in-charge and Route
Officer at the time of the weighment is also delivered along with the stocks.

v.Though the Route Officer has
to accompany the truck, the Committee observed that this rule is not followed
strictly and often Route Officers do no accompany the trucks. For instance the
Committee observed after checking records in Utnoor MLS godowns that Route
Officer was not accompanying the truck and there was no signature of Route
Officer on Truck Chits and the Weigh Check memo.

3.4Complaints of short
weighment

Committee observed that there is no computerization at the MLS point. The MLS points had small
weighing machines on which weighment of huge quantity of foodgrain is not
possible. Except in the Hyderabad-Secunderabad and Vishakhapatnam where the FPS dealers
themselves come and pick their allocated foodgrains. In all other districts of
Andhra Pradesh the responsibility of distributing the foodgrains up to FPS
doorstep is on APSCSC.As the weighment
is not done properly at MLS points there was
general complaint by the FPS owners that there is always shortage of quantity
of foodgrains.

3.5Sampling

The provision of
sampling is not followed in practice. While issuing foodgrains and transporting
them for FPS by trucks of stage II contractors, the various MLS point incharges do not
issue samples of foodgrains. All the FPS owners who attended public hearings
conducted by the Committee and owners of Fair Price Shops visited by the
committee informed that they never received any sample from MLS godowns. This was admitted
by most of the MLS point in-charges. However,
few MLS point in-charges stated that they issue samples
but in those cases also committee observed that they did not even know the
procedure of sample making and issuance, which clearly showed that they were
not issuing samples.

3.6Hamalis (Loaders)

3.6.1Hamalis
are engaged at every MLS point in groups. The
entire group is paid remuneration on the basis of work done. They are paid Rs.
2/- per quintal for unloading the grain from the truck when grain is received
from FCI. They are also paid Rs.4/- per quintal for loading and unloading the
truck at the time of delivery to the FPS. On an average a Hamali earns Rs.
3000/- per month. Besides this it was reported that the Hamalis force the FPS
owners to give them Rs. 2/- per quintal as tip. The total amount is then
divided between the Hamalis working at the MLS point.

3.6.2The APSCSC
has been undertaking the coverage of Group Insurance Scheme under Jansree Bima
Yojana to the Hamalis working at CSC/GCC MLS points as a nodal
agency w.e.f. 2006 by paying an annual premium @ Rs. 100/- per Hamali.

3.7.1The APSCSC
procures paddy from local farmers at MSP (Rs. 930/- per quintal) and sends the
same to the FCI for the purposes of the PDS.

3.7.2The MLS had electricity. No
landline was available at the MLS. MLS incharge Sachin Haran
informed the Committee that he does not receive samples of grain from FCI. The
Committee observed the following -

a.No stock board displayed
outside.

b.There were no boards on sacks
to distinguish which category grain is lying i.e. whether it is BPL rice, AAY rice, or Annapurna food grain, ICDS or MDM.

c.The entire stock of grain was
stacked together irrespective of the date of arrival.

d.The stock does not stay at the MLS for more than 7 days.
Thus no sampling is done in the godown.

e.Stock as on 3rd June lying in MLS – 141.224 MT Rice and
20.778 MT wheat

f.Farthest FPS under this godown
is at a distance of 40 km

g.Till 03.06.2009, 78 shops had
lifted the food grain for the month of June

h.Advance allocation to FPS for
the Month of June, 2009 had started on 22.05.2009

i.The MLS catered to 103 FPS

·Ramayampet - 40 shops

·Chegunta - 37

·Shankaranpet - 26 shops

j.Every truck of Stage- II cateres to
around 1-2 FPS.

k.The weighing machine was lying in the
godown. However, the Committee observed that weighment of the entire stock
received from the FCI was not possible on such a small weighing machine. The
Godown Incharge later stated that weighment is done at FCI and he relied on the
Truck Chit.

l.In Stage-I transportation, no officer of APSCSC accompanies the
transport vehicle and it is only the contractors who are responsible and
accountable for any shortage of the food grains.

m.Committee then checked the various registers and also the list
of FPS and randomly observed / noted the stock issued.

n.FPS Owner - Rajinder Reddy

Stock
issued -

PDS Rice

AAY

Annapurna

Red Gram Dal

Palmolein
oil

59.40 Q

10.85Q

10kg

2 Q

200 Packets

3.7.3Sugar
was not lifted as money had not been deposited (The MLS in charge informed that
the FPS owner may lift it later).

3.7.4The
Committee Members also spoke to the farmers who had come to the procurement
center for selling their grains. It was informed that the farmers used to get
the grain on carts. Some of them came from a distance of 25 kms away. One of
the farmers stated that he had brought 67 bags of paddy and would sell the same
at Rs.9.30/- per kg., since it was a Grade A food
grain. The said farmer had traveled a distance of 1 km. It was stated that one
bag contains 40 kgs. of grain. The farmer stated that
they receive the payment within 15 to 20 days by cheque.

3.8Visit to MLS point, Utnoor (Adilabad)

3.8.1Deputy
Tehsildar, incharge of the MLS point, had been posted at
the godown since November 2006.

Committee’s
observations:

Godown incharge informed that he does not receive any sample from
FCI. However, he said he gives the samples to the FPS.

Total allocation at the MLS point – 2062.98
quintals (4201 Bags).The FPS dealers take their allocation from the MLS points and themselves accompany the truck carrying their stock.

The Committee observed that hundreds of small packets of rice in
polythyne pouches were nicely displayed on a bench lying exactly in front
of the entrance. As stated by the godown Incharge these packets were
prepared as sample packets by the godown Incharge to distribute to FPS and
he stated that these packets are left overs and he had issued samples to
the shops. However, the Committee observed that the said displayed packets
were new packets probably prepared for the display during Committee’s
visit. No seal on the samples and no description was
present on those displayed packets so that no one can correlate for which
stock it is prepared. As per standard sampling procedure two samples are
to be taken out by the MLS point at the time
of delivery of stock to the FPS. Each sample has to be marked showing the
particulars of the MLS point, the FPS,
the month for which the commodity has been issued, the date on which the
sample is drawn and should bear the signature of the in-charge of MLS point .The samples
have to be sealed with the seal of MLS point. Once sample
has to be handed over to the FPS owner and the other corresponding sample
has to be kept at the MLS point.

Manual weighbridge is used in this godown.

Electronic weighment receipt is not issued by FCI and the Truck
Chits and WCM were handwritten receipts.

The godown premises/ building was of GCC .

Seeing the Truck Chits of Stage II it was observed that no Route
Officer accompanies truck as no signature was present on Truck Chit.

On the query of the Committee the MLS point in-charge
informed us that when he receives foodgrains from FCI, he does not weigh
stock while receiving from FCI and stock is directly positioned in the
godown without weighment as weighment is not possible in the available
weighing mechanism available with the MLS point and they
rely on the weight check memo given by FCI.

The Committee asked as to how communication about issuance and
dispatch of stock is done. MLS incharge stated
that they use their cellphone. MLS incharge said that
they don’t use any SMS system (It is submitted that MD of APSCSC stated
they have a very good SMS system for checking the dispatch and
transportation of goods which was found to be not
existing at this MLS point.) The Claim
of the APSCSC that they have a SMS system to track dispatch of stock and
that the same is uploaded on the website, stood falsified upon inspection
by the Committee

The Committee members observed that a truck was parked just
outside the MLS point. On enquiry,
the Committee was informed that the truck was waiting to be loaded with
grain, which would be done after the inspection of the Committee was over.
The Committee members spoke to the owner and driver of the truck, Nirmal,
who stated that the capacity of the truck was 10 tonnes. The truck
supplies grain to the FPS located at Gutti, Karsapur, Gadiguda and
Lokhari. In a single day it delivered grains to 2-3 FPS and it took about
15 days to complete the distribution. In case, more trucks were required,
the same are taken on lease. The FPS were supplied the grain on the basis
of the Release Orders issued. Apart from the release order the truck
driver would also carry a Truck Chit with him. It was stated that at the
time of issuance of grain, the FPS dealer is present at the MLS point and the weighment
is done before him and his signature is taken.

The Committee perused the list of FPS, Goods Received Register and
other documents at the MLS point.

The Trucks at the said MLS point come from
Nizamabad (FCI). However, only when the truck reached the MLS point does the
godown incharge get to know the exact quantity which has been sent in the
said truck

No computerized Weight Check Memos are received from FCI. All Weight
Check Memos are hand written.The
said MLS point has a storage capacity of 2,200
quintals of grain. The building is owned by GCC and Rs.1,339/-
is given as the monthly rent.

3.9Visit to the MLS point, Singanamala Mandal

3.9.1The
godown incharge, Mr. Hazi Vali, informed that he did not have the list of FPS
to which his godown caters. The Committee went through the Issue Register at
the godown observed that rice was being delivered to the respective FPS from 1st
to 10th Sugar is delivered from 13th onwards. The
Committee also inspected the Goods Receipt Register and observed that White
eraser fluid had been used at a large number of places to make variation in the
figures. The godown incharge stated that it was only on account of mistake in
calculations. It was stated that at the time the stock came from the FCI, it
was not weighed at the MLS point. The Committee
observed that there was no stock board at the godown. The stacks of bags also
did not have stack cards and the bags were stacked in bulk without any fixed
pattern of layering. Thus the godown incharge had no means to keep a tab on the
number of bags present in the godown.

3.10.1The Committee met the godown incharge, Mr.
B. Sundar Raju. Total Capacity of MLS point was 1000MT.No samples were found in that godown and MLS incharge stated that no
samples were received from the FCI along with stock. There are 101 FPS attached
to this MLS point (72 urban and 29 rural).

3.10.2The MLS point was storing both PDS and non-PDS commodities, all of
which were properly stacked and labeled. However, the FCI norm that the grain
should be stacked on wooden planks and also that the grain should not be placed
at the corners/adjacent to the walls, was not being followed at the MLS point. When the grain
was transported /sent to the FPS, the truck was accompanied by a Route Officer.

3.10.3There
were two godowns within the premises of the MLS, one of which only
contained PDS Rice. It was stated that the entire stock of rice
was lifted within one month

3.11Visit to Chandragiri MLS point on 7th June,
2009

3.11.1 Godown Incharge, Mr. B. Raja, informed that
he had been working there for the past one and a half years. Apart from him,
there was only one more attendant at the godown plus 5 hamalis. The Committee
members also went through the registers and account books of at the godown.
Committee observed that as per records the allocation received in April and May
was not clear. It is strange that MLS incharge mentioned that
maximum allocation for April was done in March for which no record was present.
Maximum record for allocation for the month of May 2009 was also not present. He
stated that it has been delayed so same will be entered in June month. Thus,
allocation received in MLS point for a month was
not clear from the records.

3.12Weighment

3.12.1As per
the G.O 83 issued in 21.12.2006 the FCI shall ensure that Electronic Weigh
Bridges are installed at all loading points by replacing the existing
“Mechanical Weigh Bridges” within a period of 6 months and it shall further be
ensured that the “Electronic weigh Bridges’ are not operated manually at any
point of time. Committee found that Truck Chits, and weight check memo’s
received at MLS point Utnoor were handwritten and not
electronically printed.

3.12.2Similarly
same G.O 83also in Para 6.1provides “APSCSC is responsible to curb and
prevent shortages, misappropriation and diverson of stocks, hence it should
duly and diligently exerciseinternal
controls, improving the procedures, installation of computers, electronic
weighing scales and training of the staff to ensure clean Public Distribution
System without any scope for loss of the Government. At any cost the system
failure should not come in the way of protecting the interest of the consumers”

3.12.3It
further provides that stock should be released to FPS on 100% weighment basis,
duly recording on Weighing Check Memo /backside of Release Order.

3.12.4Vice
Chairman and Managing Director, APSCSC Ltd. Hyderabad is to ensure that
Electronic Platform Scales are installed at each MLS point with in a period
of 6 months from the date of issuance of the Order.

3.12.5Inspite
of the clear provisions of the G.O 83, electronic weigh bridges were almost
non-existent. The mandate of installation of computers / electronic weighing
scales envisaged in the said G.O which was more than two years old was given a
total go-by by the department.

3.13Sampling

3.13.1 The Committee in its Questionnaire asked
the Government of Andhra Pradesh about the checks to ensure that stocks of
essential commodities issued by FCI are not replaced by stocks of inferior
quality grain during storage, transit or any other stage till delivery to the
ration card holder. In its reply the Government of the State stated that
“Stocks are lifted from FCI duly following the procedure laid down for joint
sampling. The Transport contractor is also required to bring the sealed samples
of the rice lifted from the FCI godown and hand over to the MLS Point in charge for
verification of the quality. The truck wise dispatches from FCI godowns and its
receipt at MLS point are being monitored on daily basis. Samples
fo stocks lifted from MLS points are also kept in
FPS to be checked by the beneficiaries.” However, during its visit Committee
found that there is no system of sampling of stocks neither during Stage I
transportation nor Stage II transportation. Samples
are not sent by FCI to the MLS points of APSCSC.
Similarly MLS points also do not send any samples to FPS shops
thus there is no mechanism for quality control.

3.14Observations

3.14.1There is no check on the
quality of foodgrain distributed to the consumer. The MLS godowns do not receive
any sample from the FCI. No samples are issued while issuing the stocks from the
MLS Point to the FPS.

3.14.2The weighment mechanism
is not electronic and it is not possible to weigh the large quantity of
foodgrain received from the FCI. Thus the MLS points do not weigh it
while receiving foodgrains from FCI.

3.14.3Most of the Mandal level Stockist Points do not have electricity
connection and there is no telephone connection in any of the MLS points.

3.14.4As per the records maintained at the MLS point, it was not clear
as to by what date the entire stock of a particular month was received at the MLS point and the Committee
observed that it comes randomly as per the requisitions sent by the MLS. All the commodities like
daal, sugar andoil,
are not supplied regularly.

3.14.5Records regarding the quantity of grain received
and issued is not properly maintained by all godowns. For example the Committee observed
in Singanamala MLS point that there were
corrections by using white fluid at many places in each sheet of the stock
register. Similarly in Chandragiri MLS point, the Committee
observed that as per records the allocation received in April 2009 and May 2009
was not clear. It is strange that the MLS point in-charge
mentioned that maximum allocation for April was done in March for which no
record was available, and the maximum record for May allocation was also not available
as, he said it has been delayed so the same is entered in June month. Thus
allocation received at the MLS point for a month was
not clear from the records.

Chapter 4

MODE OF APPOINTMENT OF FAIR
PRICE SHOPS DEALERS

4.1The
Andhra Pradesh PDS control order 2008, in its Clause 2(d) states that in respect of FPS, Appointing Authority
means District Supply officer (city) having jurisdiction over the area in
respect of Hyderabad district, the District Supply Officer (City) having
jurisdiction over the area in respect of Vishakhapatnam city and the Revenue
Divisional Officer or the Sub- collector concerned in respect of other
districts.

4.1.1Clause 5 of the same says that with a view to
control and ensure proper distribution of scheduled
commodities owned by the State government, the Appointing Authority may issue
authorizations to Fair Price Shops.

4.1.3The said notification says that all the
vacancies of FPS shall be notified on the 1st of every month by the
Appointing Authority and invite applicants for walk in interviews along with
original certificates on a specified date atleast after ten clear days time of the notification. The results shall be
announced on the next day of the interview. There shall be no postponement of
date by the Appointing Authorities.

4.1.4The notification shall be affixed on the
notice Boards of the RDO, the Collector and
copy be sent to the Sarpanch, Mandal level FAC, members of the FAC attached to
FPS and to the MLA and the MP of the area. In twin cities of Hyderabad and
Secunderabad, the notification shall be published at the office of the Chief
Rationing Officer, the ASO having
jurisdiction and the Commissioner of Civil supplies, copies of the notification
shall sent to the members of the Corporation, Circle Level FAC and also to the MP
and the MLA ofthe area.

4.1.5As per Para 7 of Annexure to G.O.MS 52, CaF
and CS (CS.I)Dept., DT:18-12-2008, following reservation shall be observed

1.Scheduled Castes- 15%

2.Scheduled Tribes -6%

3.Physically Handicapped 3%

4.Backward class -25%

5.Women 30%

However, the data given
by officers of different districts differs from the criteria regarding the
reservation in appointment of dealer provided in the abovementioned guidelines
which shows that the officers were ignorant of the above mentioned criteria. As
per the officials the reservation criteria was as follows : SC 17%, ST- 7 %,
Backward class 25 %, Minority – 5 %, Physically handicapped – 3 %.

4.2Eligibility to
be appointed as FPS dealer

4.2.1As per thePara 4 of Annexure to G.O.MS 52, CAF and CS
(CS.I)Dept., DT:18-12-2008,only
unemployed persons or from persons from Registered Rural area groups of Women’s
voluntary Consumer Organisations (which have only women as members) or Women’s
thrift groups, Co-operative societies, run exclusively by women, shall be
eligible for appointment as Fair Price Shop dealers.

4.2.2Applicant should
be financially sound to lift the allotted essential commodities by the
authority and should not leave essential commodities unlifted due to financial
constraints.

4.2.3Para 5 of the
abovementioned document says person should be qualified upto to 10th
Standard, which is the minimum general educational qualification required for
appointment as Fair Price Shop dealers. The said para further says that persons
possessing the minimum general educational qualifications and the persons
having higher qualifications, if applied, shall be treated equally to the
purpose of appointment. Where no candidate is available with the said minimum
general educational qualifications, a candidate possessing a lesser educational
qualifications which shall not be less than a pass in 7th class, may
be considered for appointment.

4.2.4The minimum age
for applying for grant of a FPS is 18 years.

4.2.5The Candidate
shall be a resident of the Gram Panchayat or the Municipal limits of the town
as the case may be, in which the shop is to be located.

4.3Guidelines to be
observed in Tribal Areas:

4.3.1In tribal areas the FPS shall function through the DRD of the GCC
wherever they exist. Where there is no DRD, Project
Officer of ITDA shall identify suitable tribal beneficiary and the FPS be
entrusted to him,who shall be provided with
Institutional Finance from A.P scheduled tribes finance corporation/ ITDA /GCC
or through a commercial bank

4.3.2Selection of beneficiary to run FPS shall be done
by the Project Officer, ITDA concerned and the candidates thus selected will be
appointed as FPS dealer by the Appointing Authority.

4.3.3In respect of those villages where no tribals are
residing in the tribal areas, the GCC alone shall run the FPS through their DRD. The said guidelines also says that immediate action be taken to
replace all FPSs which are now being run by Non- tribals.

4.4General
instructions regarding all kind of retail dealers

4.4.1Every candidate appointed as FPS dealer shall be required
to work for a minimum period of 5 years unless authorization is suspended or
cancelled.

4.4.2The candidate should not have adverse antecedents.

4.4.3The applicant should personally run the FPS and not
run in benami or through agent. However the same is relaxed in case of women
FPS dealers.

4.4.4The Candidate shall not have any connections with
any other business dealing with Rice, sugar, wheat etc. directly or indirectly.

4.4.5Clause xviii (e) of Para 12 states that
FPS shall use only those registers in which all the pages are stamped and the
total number of pages are certified by the concerned Tehsildar / ASO

4.5Tenure/ period

As per the norms, the
validity of the licence given to FPS is for 2 years and the same needs to be
renewed after that period.If it is not
renewed within that period, the licence of the FPS is cancelled and the amount
deposited is forfeited. At the public hearing at Hyderabad in a representation
made by the Greater Hyderabad Fair Price Shop Dealers Welfare Association, it
was suggested that after the death of the FPS dealer, his licence should be
given to his legal heirs / dependents as they face hardship due to sudden death
of the dealer. However, the Committee is unable to accept the request. An FPS
owner is merely a licencee for a fixed period. The FPS owners claim that they
are not earning sufficiently from the FPS and sometimes they are even incurring
a loss, in such circumstances it is difficult to understand why there is a demand
to pass on such a business to their heirs. The reason is not far to seek. It is
the earning from the black market.

4.6Procedure of appointment

4.6.1It was stated that on receiving authorization
from the RDOs, applications are called for FPS dealership. Thereafter, the
antecedents and qualifications of the applicants are verified. It is also
verified whether they have been convicted under Section 6A of the Essentials
Commodities Act. The Tehsildar also makes inquiry about the applicant’s
character, family members etc.[4]
Thus it is done in the following stages-

i.Advertisement in newspaper

ii.Walk in interview

iii.Before appointment –
verification of antecedents by Tehsildar

iv.Deposit of prescribed fee

v.Issuance of licence

4.6.2On selection as FPS dealer, the applicant is
made to give a Trade Deposit which is Rs. 4000/- in Urban areas and Rs.3000/-
in Rural areas. A renewal fee of Rs.250 is taken after 2 years.

4.6.3At, Hyderabad, the CRO informed about the
process of appointment of dealers. He stated that notice is published in the
newspaper and candidates submit applications for a walk-in interview. The
Committee also inspected few files and observed that alongwith applications the
following documents were deposited:-

1.Solvency Certificate

2.SSC 10th Certificate

3.Bonafide Conduct Certificate

4.Caste Certificate

5.Residential Proof

6.Affidavit

4.7Observations
of Committee

4.7.1One of the Fair Price Shop dealer at Hyderabad informed the Committee
about the malpractices in the appointment of dealership. The Committee was
informed that in response to the advertisements, one has to apply for a shop
and applicant is called for an interview. There are several recommendations
from MLA’s/ VIPs and also the political influence on the officers. On the basis
of political influence, the FP shops are allotted. Further for those, who do
not have such influence, officials of Civil Supplies contact the applicant and
after knowing the bank balance and the status of applicant, they demand an
amount of Rs. 60,000-70,000 as bribe. If the applicant wants a ration shop he
has to pay this amount to the ASO/DS0. Apart from this he has also to pay Rs. 5000/- to the Area
Inspector. Only after that can he get a licence of Fair Price Shop. Further he
has also to pay Rs. 1000-1500 every
month (depending upon the number of ration cards) to the local area inspector

4.7.2Officials of the Civil
Supplies department make bogus ration cards and handover these bogus cards to
the FPS dealers at the rate of Rs. 1000/- to Rs. 1500/- per card. Normally,
these bogus ration cards are made for five years. To recover this amount, FPS
dealers grain on these cards and sell these commodities in the open market at
the higher/market rates.

4.7.3The Committee met the
Appointing authorities in districts Adilabad, Medhak, Ananthpur, Chittoor, and
also in Hyderabad and Vishakhapatnam. The authorities informed that there is political influence in
appointment of dealers and usually the dealers are recommended by the political
persons.

4.7.4In the light of the above, urgent steps need
to be taken to rectify the anomalies such as:-

1.There should be explicit and
proper guidelines for appointment of dealers prescribing qualifications for
eligibility.

·The dealer should be a resident
of the area and

·The applicant should have a
running kirana / Grocery business.

·The applicant should be
financially sound so that he can lift all the PDS items in one lot.

·The applicant should have
sufficient storage space to store PDS commodities for the
entire month.

2.The applications received for
appointment as a dealer should be verified at the spot.

3.Political interference in appointment of dealers should be completely
eliminated.

4.There should be a properly constituted committee for recommending the
suitable person for appointment as a Fair Price Shop dealer.

5.1In the memorandum dated 31.03.2008
submitted by the State Government to the Committee the number of PDS ration cards
category-wise as on 31.12.2007 was given as under:

a. While (BPL): 1,70,28,078

b. Antodaya Annayojana:15,57,800

c. Annapurna:93,200

d. Pink (APL):38,28,661

----------------

Total:2,25,07,739

----------------

5.2With regards the amount of commission to be
paid to FPS dealers, the Commissioner of Civil Supplies in his letter dated
31.3.2009 gave the following margins for the FPSs.

Per Quintal

Rice

In Hyderabad, Visakhapatnam and VijayawadaRs. 17.11 + gunny

In other areasRs. 12.92 + gunny

Wheat

In Hyderabad, Visakhapatnam and VijayawadaRs.18.00 + gunny

In other areasRs. 13.00 + gunny

Sugar

In Hyderabad, Visakhapatnam and VijayawadaRs.23.96 + gunny

In other areas Rs.15.53 + gunny

K.OilRs.0.25
ps.litre.

Upward revision of margins is under active consideration of Government
of A.P.

5.3
Government of Andhra Pradesh has
issued instructions (G.O. Ms. No.35 dated 17.9.2007) for rationalization of the
Fair Price Shops.This has been done
keeping in view the economic viability of the FPSs and also the convenience of
the card holders. This G.O. was the subject matter of challenge in the A.P.
High Court in various Writ Petitions filed by individual FPS owners and
Association of FPS owners. To understand the scope of challenge by the FPS
owners it would be appropriate to set out the G.O.

“…In the reference 1st read above orders have been issued
directing the District Administration to follow certain guidelines in opening Fair
Price Shops basing on the need at the village level in the districts.In the ref 2nd read above
instructions have been issued for opening new Fair Price Shops or for
bifurcation of the existing Fair Price Shops in the districts keeping in view
the economic viability of Fair Price Shop and also in reorganizing the Fair
Price Shops wherever necessary.

2.Government have issued
orders in the reference 3rd and 4th read above, directing
that IRIS based ration cards shall be issued to all eligible families in the
State with IRIS technology and bio-metric system.In the system all families have been issued
IRIS based laminated cards as per the eligibility thereby the PDS network is further
strengthened.

3.Prior to issue of Iris
based ration cards, 1.98 crore cards were in circulation and they were attached
to 41,618 Fair Price Shops in the State.After the issue of Iris based ration cards to all eligible families,
2.23 crore iris cards are in circulation, thus there is an increase of nearly
25 lakh ration cards in the State.It is
noticed that there is no uniformity on attachment of BPL and APL cards to the Fair Price
Shops.Hence, there is every need to
rationalize the existing Fair Price Shops under PDS network, with minimum
number of BPL cards not only to make the Fair Price Shop economically viable but
also to open Fair Price Shop in the areas accessible to the card holder in the
public interest.The Collectors (CS) /
Chief Rationing Officer, Hyderabad have been frequently seeking permission for
creation of new shops by rationalizing the existing Fair Price Shops due to
increase of Iris based ration cards, for smooth functioning of public
distribution system.

4.The paramount
consideration in creating the new F.P. Shop should be the convenience of the
card holders, to strengthen the public distribution network further it is
decided by the Governmentto open 2850
F.P. Shops additionally on account of the rationalization.This is only an indication of possible number
of F.P. Shops approximately to be opened.But the number may be more or less depending on the need.Collectors are requested to examine the
requirement of FP Shops for each and every village / ward keeping in view of
the following guidelines and create new shops and intimate the number of shops
finally opened in the district to the Government within 45 days.All the card holders of the newly created
shops shall be intimated on the creation of new shops locality where they can
draw the commodities.

5)Government after careful
consideration of the matter, hereby order for rationalization of existing Fair
Price Shops in the State by attaching the required number of cards to each shop
for convenience of the card holder in the locality and keeping in view the
economic viability of the Fair Price Shop.The following instructions shall be scrupulously followed in the
rationalization of the Fair Price Shops.

a)Rural areas: The number of Iris based ration
cards to be attached to each Fair Price Shops is 400 to 450 BPL and 50 pink cards.

b)Urban areas:The number of Iris based ration cards to be attached to each Fair Price
Shops is 500 to 550 BPL and 250 pink cards in Municipalities and erstwhile Taluk Headquarters.

c) Corporations:The number of Iris based ration cards to be attached to each Fair Price
Shop is 600 to 650 BPL Cards and 400 pink cards.

6)The
following norms shall be followed in the process of rationalization of Fair
Price Shops:-

(i) Hyderabadcity – If the cards of the existing Fair Price Shopis more than the minimum of 600 cards (White
/ AAY / AP/ crippled weavers) and 400 pink cards, the excess number of cards of
such Fair Price Shop shall be transferred to a new Fair Price Shop to be
located in the same locality.

(ii) Opening of a Fair
Price Shop within one kilometer radius of the residence of the card holder
shall be scrupulously followed.

(iii) In Municipalities / erstwhile taluk headquarters (urban) each Fair
Price Shop should have a minimum of 500 BPL Cards.

(iv) In Mandal headquarters each Fair Price Shop should have a minimum of
500 BPL cards and 250 pink cards.Keeping in view the guidelines already issued, new Fair Price Shops can
be opened based on the need.

(v)Rural areas – Each Gram Panchayat (v) should have at least one F.P.
Shop with a minimum of 400 BPL cards and 50 APL cards.In case, there are more
number of cards in excess of the minimum number of cards i.e. 400 BPL and 50 APL in a village there can
be two FP Shops, provided the total number of BPL cards in that village
is not less than 600 and the number of BPL and APL cards should be
attached to the two Fair Price Shops equally.

7.All the District Collectors, Collectors
(CS) / Chief Rationing Officer, Hyderabad, hereby requested to review the
position keeping in view the orders now issued and reorganize by creating new Fair
Price Shops wherever necessary…”

5.4The High Court dismissed the whole batch of
Writ Petitions. The operative portion of the judgment dated 25.03.2008 read as
under:

The contents of G.O.
already specified above need not be repeated.As can be seen from the said G.O. the State Government had thought of
issuing the said G.O. as a policy measure in public interest.While balancing the public interest or
individual interest normally preference to be given to the public interest when
compared to the individual interest.However, it does not mean that the interest of the Fair Price Shop
dealer to be totally ignored.The harsh
conditions imposed on a Fair Price Shop dealer also had been highlighted in
elaboration.The minimumnumber of cardsand the economic viabilityof such Fair Price Shops always to be kept in
mind though the public interest involved may have to be given due weight.Inasmuch as this is a policy decision taken
by the State Government this Court is not inclined to disturb the same.But at the same time even in the light of the
specific stand taken in the counter-affidavits this Court does again emphasize
that the economic viability to be kept in mind while adjusting or arranging the
Fair Price Shops.

Except emphasizingand making this observationthe impugned G.O. cannot be found fault and
especially in the light of thelimitations imposed on this Court while interfering with policy matters
while exercising power under Article 226 of the Constitution of India these Writ
Petitions are liable to be dismissed and accordingly hereby dismissed
subjectto the above observations.No costs.

5.5During the course of the discussions, the
Court also observed as under:

Even in the
lightof the stand taken in the
respective counter-affidavits, this court does hope and also emphasize that the
respondents are bound to keep in mind the economic viability of the respective Fair
Price Shops and Fair Price Shop dealers.This Court is making this observation in the light of the specific stand
taken in the counter-affidavits in these Writ Petitions.Elaborate submissions were made relating to
non-viability data and non-application of mind before issuance of the G.O.
impugned in the present batch of Writ Petitions.

5.6It is not necessary for the Committee to
refer to various contentions raised in the Writ Petition challenging the G.O. except
to note the allegations and counter-allegations regarding viability of
FPSs.It was submitted that that FPS
owners were getting a meager commission and the shops were not economically
viable and if rationalization as proposed by the aforesaid G.O was done their
position would be worse.

5.7The following statement shows the exact
position of commission, income and expenditure[5]:

COMMISSION:

COMMODITY

URBAN AREA

RURAL AREA

P.D.S. Rice (per Qtl.)

Rs. 17.11

Rs. 12.99

A.A.Y. Rice (per Qtl.)

Rs. 17.11

Rs. 12.99

Sugar (per Qtl.)

Rs. 22.95

Rs. 14.52

Wheat (per Qtl.)

Rs. 18.00

Rs. 13.00

K.Oil (per ltr)

Rs. 0.25

Rs. 0.25

5.8Statement showing the income of the
dealer having 618 cards attached (rural area):

COMMODITY

ALLOTMENT

(in Qtl/Kg/Lts)

COMMISSION

(in Rs.)

INCOME

(in Rs.)

P.D.S. Rice

90-00

12-92

1162-00

A.A.Y. rice

10-50

12-92

135-00

Sugar

600

14-52

87-00

K. Oil

1600

0-25

400-00

Total Commission

1784-00

By selling empty gunny bags

200 xRs.8/-

1600-00

By selling empty sugar bags

6 x Rs.15/-

90-.00

Total
income

3474-00

5.9.Statement showing the expenditure of the
dealer having 618 cards attached (rural area):

SL. NO.

PURPOSE

AMOUNT (IN Rs.)

1.

Rent for shop/mulgi

650-00 (minimum)

2.

Electricity charges

150-00

3.

Assistant salary

1000-00

4.

Hamalies

360-00

5.

D.D. charges

200-00

6.

Interest on loans

600-00

7.

Stationery

50-00

8.

Licence fee, seals for
weighment etc.

150-00

TOTAL

3160-00

5.10It was alleged before the High Court that
while there was no enhancement of commission, maintenance expenditure of FPS
shop had increased i.e. rent, electricity, wages for unloading, storage,
handling charges and licence fee.The
number of cards per shop were sought to be reduced by the G.O. which would
seriously affect the viability of the shop.Reference was made to another G.O. regarding minimum wages payable to
employees of shops and commercial establishments (G.O. Ms. No.80 dated
2.12.2000) as under:

CADRE

MIN.WAGE

VDA

TOTAL

HELPER

2020/-

1554/-

3574- 00

SALESMAN

2733/-

1554/-

4287-00

5.11It is stated that at present no commodity is
issued to the pink card holders and the dealers are also not getting any
commission for pink cards.These pink
cards are being used by the card holders as identity proof only. The dealers
questioned the tentative income shown by the Government as Rs.2062.32 on 400
cards (White cards) and said that Government very cleverly was silent as to how
much amount the dealer has to invest for getting an income of Rs.2062.32 and
out of which what will be the net income for survival of FPS dealer after
incurring the expenditure.As to the
amount that has to be invested by the dealer on 400 cards, was given by the
dealer is as under (based on the quantum of commodities that may be allotted
presumably on 400 cards):

Sl.No.

Commodity

Quantity x price

Total

1.

Rice

Qtls.64 X512-08

32,773-12

2.

Wheat

Qtls. 2 X 687-00

1,374-00

3.

Sugar

Qtls. 4 X1334-47

5,337-88

4.

K.Oil

Lts. 1200 X 9.50

11,400-00

Total investment

50,885-00

5.

Expenses

Rent

600-00

6.

Commission to Bank on D.Ds

200-00

7.

Stationery

50-00

8.

Asst. Salary

900-00

9.

Authorization fee/weight & measurement fee
(average per month)

100-00

10.

Interest on investment

500-00

11.

Electricity charges

150-00

12.

Hamalies charges

300-00

Total

2,800-00

5.12It is stated that it would be seen from the
abovestatement that on 400 cards an FPS
dealer has to invest Rs.50,885/- upon which he gets an income of Rs.2062-32/-
per month as calculated by the Government which was not even sufficient for the
expenses incurred byan FPS dealer.

5.13It is stated that the FPS Dealer Association
requested the authorities to increase the card position to FPS dealers as
under:

a)400 to 450 BPL and 50 Pink cards to
600 to 650 + 50 pink cards.

b)500 to 550 BPL and 250 pink cards to
700 to 750 + 300 pink cards.

c)600 to 650 BPL and 400 pink cards to
800 to 850m + 500 pink cards.

5.14Further it is stated that the petitioners are
not getting more than Rs.3,000/- per month as on
today.

5.15It is relevant to note that the Committee was
informed by the State government that the commission has been enhanced to Rs 25
per quintal for cities and Rs 20 per quintal for other areas.

5.16FPS owners have demanded a further enhancement
of their commission in respect of rice from Rs. 25/- to Rs.50/- per quintal in
respect of three cities – Hyderabad, Vijaywada and Visakhapatnam and for rest of State
Rs.20/- to Rs.40/- per quintal.

5.17The Committee also examined some FPSs in the
course of its visit to Andhra Pradesh. The details of FPS No. 1, 1st
road near ShivalayamTemple, Anantapur, having 600 White
(BPL) cards is as under:

Calculation of income
for the month of May, 2009

Commodities /Qty.

Rate of Commission

Total

Rice (BPL) 79 quintal

Rs.20/qtl.

Rs.1580/-

AAY rice 14.35 qtl.

Rs.20/qtl.

Rs.287/-

Sugar 6 qtl.

Rs.15 /qtl.

Rs.90/-

Palm oil 550 kg.

Rs.1 /kg

Rs.550/-

Dal 570 kg.

Rs.0.55/kg

Rs.313/-

Kerosene 1300 litre

Rs.0.25/ litre

Rs.325/-

Total

Rs.3135/-

Sale of empty gunny bags

170@10.50 per bag

Rs.1785/-

Gross Total

Rs.4920/-

Expenditure

1 labour

Rs.1300/-

Electricity

Rs.150/-

Hamalli Charges

Rs.200/-

Draft Charges

Rs.200/-

Total

Rs.1850/-

Net Income from the FPS
= Rs. 4920 - Rs. 1850 = Rs.3070/-

5.18It would be seen that apart
from PDS items like rice, wheat, sugar, the dealer was
also selling other items.If only PDS items are taken into
consideration, the income of the dealer would come to Rs.1892/- per month as
shown under –

Commodities /Qty.

Rate of Commission

Total

Rice (BPL) 79 quintal

Rs.20/qtl.

Rs.1580/-

AAY rice 14.35 qtl.

Rs.20/qtl.

Rs.287/-

Sugar 6 qtl.

Rs.15 /qtl.

Rs.90/-

Total

Rs. 1957/-

Sale of empty gunny bags

170@10.50 per bag

Rs.1785/-

Gross Total

Rs.3742/-

Expenditure

1 labour

Rs.1300/-

Electricity

Rs.150/-

Hamalli Charges

Rs.200/-

Draft Charges

Rs.200/-

Total

Rs.1850/-

Net Income from the FPS =
Rs. 3742 – Rs. 1850 = Rs.1892/-

5.19Government Order No.35
limits the number of cards in every FPS considering its location either in the
Corporation areas, city or rural areas.

5.20Government has allowed sale
of non-PDS items in FPS but it would appear that the dealers
are not interested in selling the items. As noted in one representation given
by Fair Price Shops Owners Association, their only demand has been to increase
the commission. Government Order issued on 27.2.2009, in effect, specifically
allows the FPSs Owner to expand his basket of commodities which he can sell
from the shop that include salt, tea, toiletry, etc. The idea is to have
village mall concept. It is a matter of common knowledge that owner of a
grocery shop even in village makes sufficient money to run his household and
also to make some savings.It is
certainly necessary that FPS is financially viable which, in turn, will prevent
diversion of PDS commodities.

5.21During the course of the
Public Hearing at 01.06.2009, the Hyderabad Fair Price Shop Dealers Welfare
Association gave the Committee following worksheet as to the Net Profit earned
in each FPS –

Interest on capital investment of Rs.25,000/- @
18% per annum as per norms of the banks on loans

Rs.375.00

Total

Rs.7,025.00

Gross
Income : 8,280

Expenditure: 7,025

­-­--------

Net
profit:1,255

----------

5.22An increase in commission from
Rs.25 to Rs.50 per quintal in corporation areas and Rs.20 to Rs.40 per quintal
in other areas in the State will not make the FPS viable as the following
calculation would show.

Rural
Areas (450 BPL Cards)

Commodities

Quantity

Rate of
Commission

Income

@40/qtl.

Rice (BPL)

90 quintals

20/qtl.

1800

3600

Rice (AAY)

0 quintals

20/qtl.

0

0

Sugar

4.5 quintals

15.53/qtl.

69.88

69.88

Wheat

0 quintals

13/qtl.

0

0

Gunny Bags

180 bags

10.50/bag

1,890

1890

Total

3,759.88

5,559.88

Particulars

Expenditure

Rent

1,000

Labour

1,500

Electricity

500

D/D

300

Hamali (Rs. 3/- per
quintal)

300

Total

3,600

Rate
of Commission

@20/qtl.

@40/qtl.

Net
Income (Income – Expenditure)

159.88

1959.88

Urban
Areas (550 BPL Cards)

Commodities

Quantity

Rate of
Commission

Income

@40/qtl.

Rice (BPL)

110 quintals

20/qtl.

2200

4400

Rice (AAY)

0 quintals

20/qtl.

0

0

Sugar

5.5 quintals

15.53/qtl.

85.41

85.41

Wheat

0 quintals

13/qtl.

0

0

Gunny Bags

220 bags

10.50/bag

2,640

2,640

Total

4,925.41

7,125.41

Particulars

Expenditure

Rent

1,000

Labour

1,500

Electricity

500

D/D

300

Hamali (Rs. 3/- per
quintal)

300

Total

3,600

Rate of Commission

@20/qtl.

@40/qtl.

Net
Income (Income – Expenditure)

1,325.41

3,525.41

Hyderabad / Vishakhapatnam / Vijaywada (650 cards)

Commodities

Quantity

Rate of
Commission

Income

@50/qtl.

Rice (BPL)

130 quintals

25/qtl.

3250

6500

Rice (AAY)

0 quintals

20/qtl.

0

0

Sugar

6.5 quintals

23.96/qtl.

155.74

155.74

Wheat

65 quintals

18/qtl.

845

845

Gunny Bags

390 bags

12/bag

4,680

4,680

Total

8,930.74

12,180.74

Particulars

Expenditure

Rent

1,000

Labour

1,500

Electricity

500

D/D

300

Hamali (Rs. 3/- per
quintal)

300

Transportation

900

Total

4,500

Rate
of Commission

@25/qtl.

@50/qtl.

Net
Income (Income – Expenditure)

4,430.74

7,680.74

5.23It is proposed by the government to increase
the entitlement of rice to the beneficiaries i.e. 6kg per person and 30 kg per
unit w.e.f 02.10.2009. The viability on the proposed basis is as under: